On May 11, 2019, during the official visit of the then Prime Minister KP Sharma Oli, Nepal and Vietnam signed a letter of intent on negotiating a trade and investment framework agreement in Hanoi. It was the first official visit ever by a Nepali Prime Minister to Vietnam since the establishment of diplomatic ties 46 years ago. On the same occasion, the two countries also signed an agreement on visa exemption for diplomatic and official passport holders and a Memorandum of Understanding (MoU) on the establishment of a bilateral consultation mechanism. The signing of the agreements has been seen as a milestone in Nepal-Vietnam relations as the two nations have decided to further strengthen their ties by increasing economic engagements.
Nepal and Vietnam established bilateral relations in 1975. The South Asian country and the Southeast Asian nation have successfully built cordial ties based on mutual understanding, respect and goodwill. Currently, Nepal's Embassy in Thailand handles affairs with Vietnam, and Vietnam’s ambassador to India is accredited to Nepal.
Rajesh Kaji Shrestha, honorary consul general of Vietnam to Nepal, observes huge economic opportunities for both countries by fostering the ties. "In the last three decades, Vietnam has become one of the major industrial and commercial powerhouses of East Asia. The ASEAN country is in fact a model of economic development for developing nations like Nepal. In this context, all our efforts should be focused on strengthening economic cooperation with Vietnam," he says.
While trade between Nepal and Vietnam picked up after 2000, diplomatic engagement was still afar; it was only after Shrestha was appointed the Honorary Consul General in 2015 that things started to move ahead. The last two years have been significant in the sense that both countries agreed to increase high-level visits and diplomatic exchanges, organise meetings regularly, boost people-to-people activities, and meaningfully work together to establish result-oriented mechanisms on economics, trade and investment.
Acknowledging the need for direct air connectivity, the two countries have also decided to work on an air services agreement to promote trade, investment and tourism. Both sides have agreed to encourage businesses to survey each other's markets and participate in trade promotion activities, particularly in such areas as electric appliances, coffee, tea, seafood, textiles and leather footwear, and to explore new areas of cooperation, including energy, renewable energy, high-tech agriculture. Besides, Nepal and Vietnam have also agreed on information exchange and cooperation in agricultural science and technical research and to promote the exchange of agricultural experts.
According to Shrestha, the agreements signed are in the process of being finalised. "Recently, I talked to the Secretary of Foreign Affairs to get an update and he informed me that the paper work is in its final stages. The agreements will come into implementation soon," he informs.
Vietnam is one of the major exporters to Nepal. According to the United Nations, COMTRADE database on international trade, Nepal imported goods worth USD 91.01 million during 2017 from Vietnam. The main exports from Vietnam to Nepal are mobile phones, electronic equipment, home appliances, coffee, tea, mate and spices, beverages, spirits, and vinegar, machinery, industrial boilers, plastics, essential oils, perfumes, cosmetics, toiletries, animal fodder, edible fruits, nuts, peel of citrus fruit, melons, sugar confectionery, footwear and readymade garments. However, Nepal's exports to Vietnam stood at just USD 5.2 million with handicraft items and hides and skin being the major exported goods.
"This trade gap shows that the government needs to come up with policies to encourage Nepali exporters. There should be tax waivers in place and procedural hassles need to be removed to motivate Nepali entrepreneurs to export goods easily," opines Shrestha who is the former president of Nepal Chamber of Commerce.
In recent years, the Vietnamese government has worked to diversify its trade with other countries. Officials of Vietnam's Ministry of Trade have said that they are looking at developing markets like Nepal for trade and investment. Currently, there are some small-scale businesses with Vietnamese investments operating in Nepal. According to the Department of Industry data, four Vietnamese restaurants -- three in Kathmandu and one Pokhara -- are in service.
According to Shrestha, Vietnamese investors are interested in investing in the tourism and hospitality sectors in Nepal. "There is a need to have direct air connectivity between the two countries to invest in the industrial and service sectors. Despite having a good level of trade, businesspersons of both countries do not have many ideas about the potential areas of business investment due to the low level of people-to-people exchange," he mentions. "Vietnam is also a country with a Buddhist population majority. So, Nepal as the birthplace of Lord Buddha also has religious significance to ordinary Vietnamese and direct air connectivity between the two countries will be a spur to promote religious tourism in this regard," he says.
Besides tourism, Shrestha thinks Nepal can attract FDI from Vietnam in sectors such as agriculture, IT, food processing industries and hydropower.
According to him, the government needs to work on signing a labour agreement with Vietnam as the country is one of the major manufacturing nations in Asia. "We have been dealing with high unemployment as a result of the Covid-19 pandemic, and it is high time that the government start preparing for signing such an agreement to create employment opportunities for hundreds of thousands of youths," he says.
As a businessperson who has been working with Vietnamese businesspersons for many years, Shrestha, who is president of the Nepal-Vietnam Chamber of Commerce, shares that the bilateral trade association has been taking Nepali entrepreneurs to attend various trade fairs in Hanoi and other parts of Vietnam to promote Nepali products and also invite Vietnamese entrepreneurs to participate in international trade fairs organised in Nepal.
As the honorary consul, he has been working as a facilitator between the people, government, and business community of the two countries.
Shrestha is also a member of the Honorary Consul Corps-Nepal (HCC-N). He finds the activities of HCC-N effective in terms of supporting the government's efforts in economic diplomacy and strengthening friendship with other countries. "The HCC-N – FICAC Regional Conference 2019 held in Kathmandu jointly by HCC-N and the World Federation of Consuls during the tenure of former Dean Pradeep Kumar Shrestha was one of a kind which helped us to get recognition globally," he says, adding, "Such events can play a big role in enhancing economic diplomacy as well as promoting Nepal as an investment and tourism destination."