Historical Perspective Of Nepalese Foreign Policy
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Nepal's foreign policy is moulded by the turn of events of the 18th and 19th century. As mentioned by Pokharel: "Towards the end of 18th century, late King Prithvi Narayan Shah, from the house of Gorkha, brought about the unification of modern Nepal. In the initial stage after unification, foreign policy of Nepal was conducted directly under the leadership of the Shah rulers...until Nepalese had a direct encounter with the British colonial power in the subcontinent and were forced to enter into a Treaty of Sugauli, in 1816 AD causing a loss of one third of its territory." 
King Prithvi Narayan Shan had suggested for "the need for a delicate balance of relationship between [Nepal] and its two big neighbours, a fundamental rule of Nepal's foreign policy"  When the Ranas came into reign with the "bloody Kot massacre episode in 1846"  they deliberately swore affinity with the East India government and adjusted the foreign policy of Nepal towards India accordingly. In return, "Nepal received guarantees of protection from Britain against external aggression and interference". 
Meanwhile, Nepal's relation with Tibet and China was undergoing a tremulous phase. As one scholar writes describing the aftermaths of the third Nepal-Tibet war:
First, the opening of the Phari route, besides eclipsing Nepal's monopolistic position in Trans - Himalayan trade, paved the way for a series of catastrophic disputes with Tibet. Secondly, the conversion of Tibet into a cockpit of Anglo-Russian rivalries necessitated a redefinition of Nepal's extra-territorial rights in Tibet. Thirdly, the Anglo-Tibetan and the Sino-Tibetan conflicts made nepal's role as a mediator a unique feature in modern Trans-Himalayan diplomacy. All this a reflection of how a small nation is at times compelled to play a big role in the vortex of international complexities. 
The turning point in Nepal's foreign policy came "when the political situation in South Asian region, particularly India, [became] fluid and volatileâ€¦following India's independence, Nepal was also able to free herself from the clutches of Rana Oligarchy in the year 1950."  At the same time, Nepal witnessed her neighbour become a communist China. 
5.2 Nepalese Foreign Policy after establishment of Democracy
The establishment of democracy in Nepal saw emergence of new priorities. In 1955 Nepal started making attempts to "diversify its external relations by establishing diplomatic ties with other countries across different continents. 
The era has been termed as a period of consolidation of Nepal's foreign policy as "Nepal took one of the most important decisions in its foreign policy chapter by becoming a founder member of Non Aligned Movement (NAM) at the height of cold war."  King Birendra used this very forum, in its 1973 summit to propose Nepal as a 'zone of peace'. 
1955 was a crucial year for Nepal as it obtained UN membership and also established diplomatic relationship with China.  On the other hand, Mohan Sumsher Rana had signed the indo-Nepal treaty of peace and friendship, in 1950, just before the anti-Rana movement reached its zenith.
Nepal then became "the nonâ€permanent member of the United Nations Security Council on two occasions (1969â€1970 and 1988â€1989)" 
In 1989, India put a trade embargo on Nepal, while western analysts viewed it as a classic confrontation between an emerging regional superpower and a strategic yet landlocked nation that not only lies on India's border but also has survived economically through the years, largely through Indian generosity". 
In 1990, Nepal found reinstatement of parliamentary democracy and the 'two-pillars policy' (with prime minister as the executive head and king as a ceremonial figurehead). However, "years of increasingly dire internal security challenges had undercut the country's economic growth and reform efforts". 
Nepal's internal affairs took a turn for the worse with the onset of a Maoist agitation that transformed into an armed conflict. Apparently, both India and China contested to be the government's prime supporter in the conflict. For instance, Beijing pledged "political and moral support for Nepal's fight against the Maoist insurgencyâ€¦[in] November 2002, Beijing agreed to provide communications equipment to assist the Nepal Army in operating in mountainous terrain."  On the other hand, in June 1997 the Indian Prime Minister paid a visit to Kathmandu and both the sides "reiterated their determination to work closely to fight violence (with reference to the ongoing tension in Nepal)â€¦Home Secretary level talks were also held and all the matters relating to security were discussed in detail." 
The permanent ceasefire by the Maoist insurgents in 2006 was welcomed by both India and China. The 'tripartite relationship' between these nations from 2006 has become intertwined with the issue of state reconstruction, from Nepal's point of view. Nepal had its second communist party led government in the wake of a parliament cum Constituent Assembly which could have put the Indo-Nepal relations in test, yet again which would have put diplomacy on crucial issues, such as the ongoing 'water talks' in hiatus. However, such speculations were negated by the Nepalese Prime Minister's 2008 visit to New Delhi during which it was "decided to inject a new dynamism by establishing a three-tier bilateral mechanismâ€¦to oversee the entire gamut of cooperation in water related issues".  The much debated prospect of a possible entry of China into the SAARC mechanism, the role of New Delhi in shaping Nepal's political future, Tibet's struggle against China and Nepal's pro-China stance on it among other issues shall continue to drive the 'tripartite diplomatic relation' between Nepal, India and China.
5.3 The Road Ahead
Despite political instability resulting from frequent changes in the government, the democratic state of affairs succeeded considerably to boost Nepal's international image during this period. The country's prestige suffered a setback in the comity of nations after the Royal takeover of February 2005.  Currently Nepal is at crossroads of its destiny.  The international community has supported and welcomed the historic April Movement 2006 and the ongoing peace process and have expressed hope that elections to the constituent assembly would usher in a new era of peace and stability with a positive impact on foreign policy apparatus of the country. 
Nepal is in the transitional phase that is the drastic change in its governance. Dispelling deeply entrenched monarchy, an institution that many in the country considered incarnation of God in a matter of decade was a great feat, in a relative terms. Nepal's peace process is not over yet , as despite the Comprehensive Peace Accord, issues such as formulation of Truth and Reconciliation Commission, Former Maoist combatants reintegration, ascertainment of Federal states among others are to be settled.
Formulation of an inclusive new constitution that reflects the aspirations and commitments of all the Nepalese scattered across the Mountains, hills and Terai by the Assembly is very central to the peace process. Restructuring of the state to decentralize power and rapid socioeconomic transformation are equally crucial to build a progressive New Nepal and address the root-causes of the decade long conflict.  A pragmatic foreign policy is very critical for the successful conclusion of the peace process.
Nepal needs to adjust to the sea change in the global and regional politics over the past two decades. The end of cold war resulted in the emergence of a single superpower, the United States of America, and it has been pursuing its economic, security and strategic interests across the globe with perceptible implications to nations in most regions. The major world powers are largely in agreement to deal with contemporary international concerns through calculated co-operation rather than adversarial ideological approach.  The desire for containment and structuring of balance of power from purely military strength has shifted to the creation of a new world order based on globalization, free market economy, non-proliferation of weapons of mass destruction and primarily non-hegemonistic resolution of international conflicts and concerns. 
A late versatile intellectual who was instrumental in interpreting non-isolationist foreign policy  of Nepal has remarked that Nepalese view the world perfunctorily and on surface even by young generation who go abroad for various reasons.  To quote him, "How can we enlighten concerned citizens when both a demand and a need for the inter-disciplinary subject of international relation to be introduced in the university establishment have been like crying in the wilderness due to various reasons"?  It reflects the pathetic state of not making a productive insight in conceptualizing Nepali state and society in social sciences, let alone contemplates Nepalese international relation theory. 
Nepal is keen to further expand her bilateral relations with its immediate neighbours on the basis of equi-proximity, which obviously would enhance relations with both of its immediate neighbours. Thus, Nepal's bilateral relation with India is unique, multi-faceted and extensive  and likewise its relation with China is no less friendly and is ever expanding with the passage of time to the satisfaction of both the peoples. 
Nepal's unique geo-strategic location has shaped and guided the country's foreign policy formulation and implementation ever since the 'Yam between two boulders" strategy was adopted more than two centuries ago. Situated as Nepal is between two Asian giants, India and China, as her immediate neighbours, the need for this country to maintain balanced, cordial, friendly and cooperative relations with these two most populous neighbours cannot be over emphasized. 
CHAPTER - VI
6. DEMOCRACY IN NEPAL - THE SERPENTINE PATH TOWARDS UNKNOWN DESTINATION
Before one can think about the causes of democratization one has to have an understanding of what democracy means-for one needs to have an idea of the nature of the phenomenon one wants to explain. In its literal meaning, 'government by the people', democracy is about the institutionalization of people power. Democratization is the process by which this happens. People power is institutionalized through civic freedoms that entitle people to govern their lives, allowing them to follow their personal preferences in governing their private lives and to make their political preferences count in governing public life. 
The question: which political regime prevails in which society, and why, has been at the heart of political science since Aristotle's first treatment of the problem. And so is the question as to when and why societies democratize. Democratization can be understood in three different ways. For one, it is the introduction of democracy in a non-democratic regime.  Next, democratization can be understood as the deepening of the democratic qualities of given democracies. Finally, democratization involves the question of the survival of democracy.  Technically speaking, the emergence, the deepening, and the survival of democracy are strictly distinct aspects of democratization. But they merge in the question of sustainable democratization, that is, the emergence of democracies that develop and endure. Democratization is sustainable to the extent to which it advances in response to pressures from within a society. 
The overall principle and goal of democracy assistance are well captured in the following characterisation of the international relations at the turn of the millennium: "First, democracy's status as the predominant form of political governance within the Westphalian nation-state system and second, the emergence of an international norm that considers democracy promotion to be an accepted and necessary component of international behaviour."
6.2 Nepali State Fledgling towards Democratisation Process
Nepal witnessed an explosion of contentious activities, both violent and non-violent, after the restoration of democracy in 1990. Why did the democratic years witness so many collective public protests? Did those activities promote or hinder the democratization process, which had, ironically, provided space for them? Often the Nepali state and the fledgling democracy appeared to be overwhelmed by those activities. Can the fundamental democratic rights to dissent, mobilize and protest work against new democracies? 
Democratization of a polity, on the other hand, means extending the political rights and civil liberties to more citizens as well as increasing the responsiveness of rulers. In McAdam and colleagues'  words, democratization 'means any net shift toward citizenship, breadth of citizenship, equality of citizenship, binding consultation, and protection.' At an operational level, it could mean several things. First, all adult citizens should be included in the polity as equals. All should enjoy full political rights and civil liberties, including unhindered rights to express themselves and to form associations. Second, contestation for public offices should be open to all, in principle as well as in practice, so that all citizens have equal opportunity to reach the decision-making bodies.  Third, the public officials should be responsive to the needs and aspirations of citizens and accountable to them as well, not only during periodic elections but throughout their terms. Fourth, no elected individuals or groups should have special privilege over any public policy realms. Public policies should be made by elected officials.  Fifth, the rule of law should exist so that citizens' lives and rights are protected and elected officials are held accountable for their actions. After getting power to the people (represented by the elected officials), which is the first step in democratization, the next challenge is to ensure that elected officials are held accountable if and when they abuse power.  Sixth, in multicultural societies, the tyranny of the majority should be prevented. Not only does a majority not have the right to take away the political rights  and civil liberties  of an individual but it also does not have the right to constrain the cultural rights of minorities 
6.3 Interrelation of Democratization and Foreign Policy
Hardly could we find a more appropriate issue in this age of globalization than the relationship between foreign policy and democracy, a relationship that can only be properly analyzed in the perspective of the theoretical contributions that link international and domestic politics. 
A scholar has made following analogy of Indonesia, Philippines and Thailand with regard to the influences democratization has foreign policy:
In all three instances, Indonesia, Thailand and the Philippines, the process of democratization has had not only a far-reaching impact on the respective domestic order but also on the structure, actors and issues in foreign policy-making... The new democratic environment in all three states has opened up the foreign policy arena and gives access to a larger number of actors compared with the days of authoritarian rule, mainly to the bene¬t of ministries, other government of¬cials and a civilian diplomatic service...it can be established, however, that the wider spectrum of actors and the multiplication of special interests pose a major test to the often inexperienced executives in newly (re-)emerging democratic systems as far as the making of foreign policy is concerned. 
The democratic sphere can also be enhanced by partnership between democracies. It is, therefore, important...to promote relationships with both developed and developing democratic states. This collaboration should be based on the principles of equality and complementarily. It is also imperative to develop cooperation with the emerging democracies. The emphasis should be given to capacity building cooperation in order to consolidate the on-going democratization. 
Any discussion on Nepal's foreign policy has to take into account two separate, but inter-related challenges. The first is the difficulty in formulating and implementing a coherent foreign policy in a democratic, fragmented and unstable political setting marked by poverty in strategic thinking. The second challenge is dealing with a fluid and rapidly evolving regional context with shrinking space for an autonomous approach. 
The democratization of Nepal would require the country to reassess its conventional foreign policies. The process has placed upon the leaders of a 'new Nepal' the responsibility to readjust the country's standing on both regional and global front. This requires the leaders to acknowledge that foreign policy is in fact a part and parcel of national policies, which cannot be given a different treatment than other policies of paramount important. By implication, while the leaders are accountable to respect public interest while framing policies on issues of women and children, infrastructural constructions, health facilities, social service schemes, they are also accountable to bear those interests in mind while on diplomatic missions with Nepal. One pertinent example is the question posed by many nationals today is that Nepalese leaders are seemingly lethargic on necessary preparations for getting in talks with New Delhi on revision of the 1950 friendship treaty.
As Jha points out, the problem lies on the understanding of the nexus therein, as succinctly put by a scholar, "the study of foreign policy serves as a bridge by analyzing the impact of both external and internal politics on states' relations with each other. Leaders cannot forge effective foreign policies without being aware of these connections." 
"The primary challenge thus is building up broad consensus, through inclusive and democratic discussions, on certain core principles of foreign policy, especially with regard to the states and issues that have an impact on the lives of the citizens. Once there is an agreement on the need for such a consensual approach, specific themes can be addressed." 
CHAPTER - VII
7. RECOGNIZING AND SETTING UP FUTURE PRIORITIES IN GEARING FUTURE FOREIGN POLICIES OF NEPAL
According to Shrestha, there are five areas which need to be worked out for a "forward looking and a proactive foreign policy"  .
Nepal should have a minimum 10 years vision and a 20 years plan for formulation of its policies while also develop foreign policy guidelines that it can strictly comply with in the future. Insertion of such guidelines in its Constitution can be done for the compliance.
While resources can be exchanged between the nations in forms of goods and services, in which Nepal, as an upper riparian would help India avail its water rights as a lower riparian, in return India would allow river navigation in Nepal with consideration to the transit rights of the latter. This reciprocal arrangement could aid in economic enhancement of both the states.
Nepal is in dire need to upgrade its diplomacy skills. The previous experience of ineffective negotiations created hurdles in furthering national and collective interests represented by the country, not just in its neighboring lands but in other International as well. Shrestha has suggested "development of a research base on international relations and diplomacy" 
Any flaws in Nepal's inland security could be perceived as a security threat by India, as was in the Air India plane hijack case. India's faith in Nepal could dwindle if Nepal does not tighten its security. Same holds good with regard to China. Since Nepal's border with China consists of treacherous landscape, it largely goes unmonitored, in sheer contrast to the simple and open border with India. Concerns on security measures at those ends were raised by Beijing when Tibetans were allegedly smuggled out of their homeland to Nepal in increasing number after the Lhasa uprising, that caused the problem of Tibetan refugee in Nepal and India. The border still goes invigilated to a great extend. On the onset of new trade routes with China and reconstruction of existing closed trade routes, border security with China cannot be taken as a petty business.
Non-governmental actors such as "chambers of commerce, trade bodies, tourism organizations, sports, arts and cultural groups "should be involved in dealings with foreign government. 
7.1 Indispensible Determinants of Future Nepalese Foreign Policy
Foreign policy shift must balance continuity with changes to benefit from fast moving neighbours, India and China, and the world as a whole. Preserving national independence, sovereignty and territorial integrity, enhancing friendly and mutually beneficial relations with nation states and international organizations, and building good image will have to be the central objectives. In addition, attracting adequate resources to build sustainable, inclusive and prosperous post-conflict Nepal will be equally crucial. 
Globalization, instant communication, advanced technologies such as Google, Yahoo, Spyke, Face book and Twitter have changed the way we perceive things, conduct business and interact with each other - among nations, groups, families or friends. These amazing scientific and technological advancements have presented both opportunities and challenges to everyone. How does a developing nation like Nepal conduct itself in this changing world? What should be its focus and priorities? 
Nepal's trade and transit situation has changed drastically due to China's focus on Tibet's development. Tibet has seen phenomenal changes in recent years in terms of industrial and infrastructure development. As stated earlier, the possibilities of opening to northern frontier and through it to the rest of the world are growing. 
Nepal has been suffering a huge trade deficit for the want of prioritizing the areas of investment of our natural and human resources so that the national economy does not depend on just remittance and foreign aid. The future foreign policy of Nepal will depend on it sorting out issues like what are its priorities? What are its comparative advantages? It will have to choose and make the best from areas like tourism, hydropower, agriculture, health and education and focus on overall socioeconomic development of its people. 
CHAPTER - VIII
8. ASSESSING THE INTERNATIONAL RELATIONS BETWEEN AND WITH "THE TWO BOULDERS" AND WHAT IT MEANS AND SHOULD MEAN FOR THE FOREIGN POLICY OF NEPAL
8.1 Nepal in the various scenarios of Sino-Indian International Relation
How Nepal handles Nepal-India and Nepal-China relations in the backdrop of the unfolding Sino-Indian relations will be the test of Nepalese foreign policy in the days to come. The continuous and frequent influx of Chinese officials to Nepal has raised doubts, suspicion and concerns in India. The test of the strength and agility of its diplomacy will lie in how successful it is in convincing both of its neighbours that its policy is guided solely by its national interests without any intent to harm either's interests.  There are challenges and it is not always easy but it has to learn to walk the tight rope in dealing with either of its neighbours. All said and done, it cannot remain an island of poverty amidst this growing affluence all around it and only a sound foreign policy and the diplomatic tact and skill to implement it will help it to rise from this dismal position. 
China surpassed the U.S. to become the world's biggest trading nation in 2012 as measured by the sum of exports and imports of goods, official figures from both countries show.  It has been speculated that "at this kind of pace by the end of the decade many European countries will be doing more individual trade with China than with bilateral partners in Europe."  It has also been speculated that in 2040, the Chinese economy will reach $123 trillion, or nearly three times the economic output of the entire globe in 2000. China's per capita income will hit $85,000, more than double the forecast for the European Union, and also much higher than that of India and Japan. 
India must be well aware about the growing dominance of China in regional market. It has alleged China of an 'encirclement' strategy since the Chinese focus on the sector of transportation can be observed in the Nepal, Bangladesh, Bhutan, Burma, Sri Lanka and Pakistan and all of these countries have one significant commonality- they surround India.  However, these emerging superpowers are seeking to enhance their economic cooperation in the present light. The current Chinese investments in India are to the tune of around $580 million, a sizeable amount, which India and China are seeking to increase through agreed to a five-year plan on economic cooperation as well as setting up a joint working group (JWG) to go into all trade related issues. 
Will such competitive actions provoke confrontation between China and India? Unless there is some untoward incident caused by some miscalculation or overzealous action, it is unlikely that the same will result in confrontation between the two countries. There may be complaints, protests, accusations, harangues and verbal threats from both the sides. But that need not necessarily lead to confrontation. Other sensitive areas are the border areas between the two countries. There again, in spite of some moves viewed as aggressive by the other side, common sense has prevailed so far from escalating these actions into confrontation. 
On the other hand, territorial skirmishes are still going on between these two hefty neighbours of India. One critique writes:
Fifty years after the Sino-Indian War, territorial spat that ought be consigned to dusty 19th century archives still rankles relations between the 21st century's two rising Asian powers. Economic ties between India and China are booming: they share over $70 billion in annual bilateral trade, a figure that's projected to reach as much as $100 billion in the next three years. But, despite rounds of talks, the two countries have yet to resolve their decades-old dispute over the 2,100-mile-long border. It remains one of the most militarized stretches of territory in the world, a remote, mountainous fault-line that still triggers tensions between New Delhi and Beijing. 
A careful vigilante Nepal should be in the coming years of the power tussle and cooperation between the neighbours. That Nepal is the land bridge between India and China is a fallacy, these the nations share more border connected with each other. However, the clamours of any skirmishes taking place has had resonated in Nepal as well, in which both the neighbours wait for Nepal's response. The 'equidistant policy' of Nepal, which is also a constitutional directive principle of Nepal, finds itself being frayed when such happens.
C.K. Lal makes following observation for prospects and limits for a productive foreign policy, amidst Sino-Indian relation  :
Kathmandu has the potential to become the "idea-bridge" between the two giant neighbours;
Nepal has the potential of emerging not as an information technology hub, but as a centre of excellence in learning Chinese and Indian economy, culture and society.
Tourism development is a desirable goal, but rich Chinese are not going to come to Nepal to trek in the Himalayas for quite some time-they would rather go to Paris to learn the ways of living like Parisians or travel to London to have suits tailored at bespoke outfitters of Savile Rowâ€¦it would be too much to expect that Nepal's economy stands to benefit from development of trucking routes between Bihar and Tibet.
Nepalis have to learn to be interpreters of a new world order of which both their neighbors are going to be important players. Hindi needs to be celebrated for that reason, not because some Madheshis think that it is their mother tongue. More Nepalis have to begin learning Chinese. And Nepal needs to aim for a respectable place on the next EPI list.
Similarly, Shrestha suggests that if Nepal could have 10% of the transportation moving from it, it stands to generate 1 billion dollars worth of business annually, a substantial amount for a country like Nepal. 
8.2 India - China Interference or Nepal's Imprudent Foreign Policy?
There is nothing extraordinary for China and India to have political interest over Nepal. They reasons to have such an interest in Nepal because it is their neighbour with a contiguous territory sensitive to political unity and security. 
One apt instance would be the visit paid by Prime Minister of Nepal Baburam Bhattarai to India in the recent past. Nepal did not present a concrete proposal through official channels in advance that would have given the Indians time to process it through their multiple agencies. The Nepal embassy in India-with its limited resources, lack of outreach among influential politicians and commentators, and dismal bureaucratic leadership-was unable to do the groundwork for a big breakthrough in quick time. While the visit was a success in restoring trust between the two governments, and kick-starting many bilateral mechanisms that had been inert, it was underwhelming only because of what the Nepali side had promised. 
Managing the India-China dynamic will remain Nepal's foremost diplomatic challenge in years to come. And if we go by this year's track record, the Nepali establishment is still not equipped enough with the skills to do so tactfully. There was a vote for a position in an important UN body recently, with both India and China competing. At the last minute, Nepal decided to vote for China-Beijing, which had already served two terms on the body, lost. The rest of the South Asian region, including arch-rival Pakistan, had voted for India.  A reporter writes on the issue:
For years, visiting Indian ministers and other dignitaries have been trying to project an image of deep amity with Nepal, reiterating that the two countries share age-old cultural, social and other ties. However, apparently, these vaunted ties do not extend to working together at the UN. Even as India celebrates the victory of its candidate A Gopinathan over his Chinese rival Zhang Yan at Monday's vote for a five-year term at the UN's Joint Inspection Unit, Indian mandarins in Kathmandu have been left unhappy by the fact that Nepal chose to vote against India. 
The above is not going to the last time that Nepal is placed in a sticky situation, where it is to express its support to one of the two neighbours it does not otherwise intend to upset. The best way to go about it is a political honesty and transparency, which can only be possible if it has a certain foreign policy practice that it swears to, which should be the basis of its actions in relations to its neighbours and not speculations and predictions.
8.3 Adjusting to the Influence of Globalization and Global Economies
Rapid momentums are taking place in the world and states are competing for a comfortable positions in world polity, economic security with a few on a head on with each other. Amidst such momentums, Nepal has a huge responsibility of catching up, for becoming a developed country from a troubled and struggling developing country.
Moving out of the national scene, if we look around the world we see the most stunning and far reaching developments taking place all over and more significantly around the world. The disintegration of Soviet Union, end of the cold war, rise of the United States as the lone super power and the phenomenal economic growth of China and India are developments that have changed and are changing the shape of the world order. 
Forecasts apart, it seems almost certain that in the next 15/20 years, the world scene will be dominated by the US, China, India and EU, the latter if it could manage its internal problems. Japan, Russia and Brazil, closely followed by Indonesia will emerge as major players in the international arena. 
Scholars have opined following to be the face of world order by 2050: 
China shall remain on a path to overtake the United States as the world's largest economic power within a generation, and India shall join both as a global leader by mid-century.
Traditional Western powers will remain the wealthiest nations in terms of per capita income, but will be overtaken as the predominant world economies by much poorer countries.
European nations will be pressed to conduct foreign policy jointly, an objective implied by their recently ratified constitution, and will need to reach out to emerging powers. Japan and Russia will seek new frameworks of alliances. The largest emerging nations may come to see each other as rivals.
Absolute poverty will be confined to small pockets in sub-Saharan Africa and India, though relative poverty will persist, and may even become more acute.
International organizations such as the IMF will be compelled to reform their governance structures to become more representative of the new economic landscape. Those that fail to do so will become marginalized.
8.4 Reinforcing the Importance of Regional Organizations
Even in this era of globalization, one of the emerging trends is the formation of regional groups. The European Union, in spite of occasional problems, has become a truly pan-European movement with free movement of goods, services, capital and people with a common currency, except in a few cases. The resulting benefit has been too numerous to enumerate and far exceed the negative picture as may be reflected by the current economic crisis in some of the member countries. ASEAN has emerged as a formidable economic bloc. Similar groupings in different regions of Africa and Latin America have helped boost trade and economic cooperation among member countries. 
Nepal is a significant member of SAARC which was established 26 years ago with much fanfare and expectations, in fact Nepal proposed for the SAARC.  Within its mechanism, there have been numerous declarations, conventions, agreements and understandings aimed at achieving economic and social development, poverty alleviation, combating terrorism and trafficking, several institutions and bodies like SAARC Regional Center, SAARC University, and South Asia Forum have been established. 
Democratization process in the region is gradually gaining ground. The recently adopted SAARC Democracy Charter gives expression to collective commitment of the member states to promote and preserve values and ideals of democracy and democratic institutions. The Charter also reinforces the supremacy of the Member States' respective constitutions and envisions strengthening democratic institutions by reinforcing democratic practices. Guarantee of the independence of judiciary and primacy of rule of law along with the commitment to adhere to UN Charter and other international instruments are some of the salient features of the Charter. 
However, SAARC has even been labelled the most derided regional association in the world. It has been ridiculed for its incompetence in promoting regional trade, security, unity and a whole host of other issues. It has been called to be merely an avenue for leaders to partake in photo opportunities. 
However, there is no other alternative to SAARC for South Asians. It cannot choose not to have any sort of regional cooperation or only promote bilateral relations. 
The importance of SAARC for Nepal is immense. The impediments of globalization have made regionalism more preferable for small states. Inoguchi and Bacon enumerate on the argument drawing reference to the East Asian small states who despite their developmentalist-based successes have been poorly equipped to address and manage their high levels of interdependence sensitivity and in such lights have realized that their best response to this sensitivity to globalization is to develop an explicitly regionalist approach, but that in order to do this they have had to adapt to different and more transparent proto-democratic norms of political and economic self- and collective governance. 
The people of South Asia have been characterised as "Insecure, malnourished, ill and saturated with the fear of brute strength, violence is their only recourse and hatred their only wealth."  Nepal recently gained invaluable experience in resolving violent conflict peacefully. Leadership of wisdom could have launched a new Nepali initiative to address the chronic problem of poverty and political violence in South Asia with the elder statesman who presided over the political transition in Nepal playing the lead role in the regional and international arena rather than getting bogged down in the "politics of national and personal self-annihilation". 
Nepal should promote reinvigoration of SAARC. SAFTA is a pact signed 2004 by the SAARC member states, through which the member states intend and elevate common contracts among themselves, involving trade operated by states, supply and import assurance in respect of specific products. Agreements are to be concluded for tariff concessions and non-tariff concessions (sensitive list). This could provide special preference to least developed SAARC member like Nepal. 
8.5 Other Critical Areas not to be Left Out
The other major areas of foreign policy in the days ahead will be terrorism, climate change, disarmament, trafficking of drugs and women and children. As regards terrorism, Nepal is a signatory to international as well as regional conventions and must be always on guard to live up to its obligations. There is no place for terrorism either home grown or imported in a modern society and we have to be alert and vigilant that it does not take root in the society. 
Climate Change will be one of the most pressing issues in the 21st century. For countries like Nepal, the test of climate policy and action is how the communities will see change in their adaptation to the adverse effects climate change which they are already experiencing. Of crucial importance to Nepal is also the issue of protection of the Himalayan ecosystem against the adverse effect climate change, including through the melting of glaciers. Comprehensive framework for adaptation will also need to address the needs for disaster risk reduction. The indispensability and vulnerability of mountain ecosystem in addressing sustainability found a reference in the Rio+20 declaration, owing to Nepal's diplomacy as chair of the LDCs. This needs to be further pursued. The continuation of Adaptation Fund created from 2% from CDM under the Kyoto Protocol is also equally important for us. 
Another area is Nepal as one of the major troop contributors to the UN Peacekeeping operations that has improved Nepal's image in the international forum.  Such endeavours should be continued for Nepal to gain positive attention of its regional partners as well as other international vigilantes.
CHAPTER - XI
9. CONCLUSION & SUGGESTION
Annette Baker Fox writes, " The distinctive power of great states flows from their military strengthâ€¦for the Small state, diplomacy is the tool of statecraft".  Historically foreign policy has been a vital tool of Nepali statecraft and test of statesmanship. The nature of politics which is witnessing fundamental changes in the entire spectrum of issues/interests, institutions and actors in a crucial time (21st Century) and location (in Asia between India and China) makes Nepal's foreign policy formulation and conduct of diplomacy particularly challenging now.  The diplomats and policy framers of Nepal should be aware about the fact that its position, whether economic, political or geographic, confers upon it certain rights and privileges, and it is the international obligation of developed states to uphold them. It has, for instance, certain rights to transit and passage being a landlocked country, provided it hones in its diplomats the quality to not flinch while asserting demands of exercise of such rights and privileges in concerned platforms.
Dealing with simultaneously cooperating and competing regional and global super-powers embroiled in their own internal upheavals in a rapidly changing global political and economic order and strategic equation demands access to right information and ability to interpret it with knowledge, understanding and experience. Historical intricacies and new complexities seen through the eyes of simple convictions, outdated dogmas or vested interests distort comprehension; policies based on them can lead to unintended serious consequences.  Nepal can be no exception to this recommendation for the reason of it having just resurfaced through a horrendous armed conflict. Sympathy-based foreign aid and assistance cannot be sustained for long, since resources are diverted elsewhere when the crisis is worse. Sustainable development also requires Nepal to strength its resources. Development of human resource in fields of trade and energy will be crucial for Nepal in the days to come.
9.1 Relations of Trust and Confidence with India and China
Historically Nepal is the meeting point of two great civilizations and today it is one of the epicentres of competing interests in an impending global paradigm shift. Located between two global economic and strategic powerhouses, Nepal can greatly benefit from developments taking place in India and China today. However, it is essential to realize that proximity adds vitality but also sensitivity and complexity in interstate relations demanding high priority and careful handling.  As late Prof. Yadu Nath Khanal, the most respected Nepali diplomat scholar wrote long ago "our foreign policy will breakdown at the point where either India or China looses faith in us and concludes that her vital national interests and sensitivities do not receive proper recognition in our conduct of relations". Changing global and regional political, economic and security needs and the seriousness of the challenges faced by the South Asian states, particularly extreme poverty and threats from terror networks have made things more complicated. 
Nepal's national sovereignty and territorial integrity" while the other feels so exposed that it feels compelled to apply its own "Monroe doctrine". In this sensitive relationship, vain debates, name-calling and finger pointing only raise risks of more external involvement in internal power contests. So, domestic politics is the biggest problem of Nepal's foreign policy today; restoration of trust and confidence with all our foreign friends and partners, but most importantly India and China is the top priority of Nepal's foreign policy making and conduct of diplomacy. 
9.2 National Interest, but also Guiding Principles
Nepal will have to come up with a guideline on its equidistance principle very soon if it does not want to get too deep into the Tibet-China struggle. It has not allowed Tibetans to hold protests against China on its soil on number of occasions, including the birthday of the exiled Tibetan leader the Dalai Lama, who is reviled by Beijing as a "separatist". While Nepal cannot swear support to the 'One China Policy', it cannot discharge of China's insinuations of assistance in exchange for such support. National Interests and guiding principles should both be concerns of Nepal. 
9.3 Pro-active international role
Vitality of relations with neighbours does not preclude pro-active role internationally. Strengthening relations with the new US administration, further deepening traditional friendship with UK, European Union, Russia, Japan, Germany and France are some of the other priorities. Greater visibility in the UN, exploring possibilities for membership of the Security Council lost two years ago or actively seek the Presidency of the UN General Assembly which Nepal has not had the opportunity to preside, enhanced Nepali role in UN peacekeeping work and greater UN economic assistance are other priorities of Nepal's 21st Century diplomacy. Chairmanship of the LDC Group in New York is important but it must not be a consolation prize, at the cost of membership and leadership in other more important organs of the UN. 
9.4 Active role in SAARC
Many institutions of SAARC framework lies in Kathmandu, including the SAARC Secretariat. Nepal has been a favourite venue for hosting several SAARC summits. If Nepal proactively persuades reenergizing SAARC, it can only benefit from being the hub for south Asian diplomacy, to some extent, what Luxembourg is for the European Union.
9.5 Economic (Development) Diplomacy
Trade, tourism, employment, investment and technology transfer are important dimensions of economic (development) diplomacy. Through a more active role in the WTO, International Financial Institutions, important capitals and leadership from the capital, if Nepal could convince major donors to write-off international debt. 
9.6 Forward looking and Dynamic Diplomacy
Edward Hallett Carr suggests, before the First World War, in most democracies war was regarded mainly the business of soldiers and as a corollary, international relations and foreign policy the business of professional diplomats, outside the scope of domestic party politics or a matter of public scrutiny. The war of 1914 once and for all changed the view that war only affects and can be conducted by professional soldiers. It also ended the corresponding notion that foreign policy could safely be left in the hands of professional diplomats. 
To encapsulate in a few points, the areas to be worked out in the future for a sound foreign policy with regard to India and China would be:
Development of foreign policy guidelines, such as on the equidistance principle
Honing negotiation skills
Democratization of foreign policy
A renewed vigor and proactive participation in SAARC
Vigilance of the interactions between India and China.
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