The new Japanese ambassador to Nepal, Kunio Takahashi, spoke to Nepali Times this week on the importance of political stability for sustainable economic growth and job-creation. Excerpts:

Nepali Times: You have been posted to Nepal at a critical time in the country's history with the conclusion of the peace and constitution process. What is your government's assessment of the progress?
Kunio Takahashi: Shortly after I arrived in Kathmandu, the historic seven-point agreement was signed on 1 November by the leaders of the major political parties. Since then, positive and constructive development has been observed with regard to the implementation of the agreement, such as the establishment of the State Reconstructuring Commission, earnest initiatives to form a national consensus government, and, above all, the substantive move towards settling the future of Maoists combatants, which has been one of the major stumbling blocks towards peace and democracy. Japan welcomes this progress while expecting that the remaining outstanding issues will also be addressed through the spirit of continued understanding and cooperation among the political leaders. Japan is ever ready to support Nepal's efforts to this end.

Japan's policies towards Nepal appear to be guided less by geopolitics, but would it be right to say that Japan supports the protection of fundamental values like democracy, pluralism and free press in Nepal?
Japan's economic cooperation is based purely on our wish to improve Nepal's citizens' living standards and welfare. As you pointed out, Japan espouses democratization through, for example, running several projects to support Nepal accomplish the peace process through its own efforts. These projects include dispatching experts and JICA volunteers, conducting seminars and training, as well as providing technical assistance to empower and strengthen the capabilities of monitoring and evaluation at central and local government levels. Japan also focuses on strengthening the mediation capacity at community level, as well as strengthening the media and the legal sector's support to promote peace building and democratisation.

What would your advice be to Nepali officials about economics and development?
The development of the private sector is essential for sustainable economic growth. Nepal has been receiving very large amounts of remittance, but this is being used to buy cars, bikes, electrical goods etc, and is not being saved. Therefore, the huge amounts of remittance isn't utilised fully as investment in the industrial sector. This is the fundamental problem of the Nepali economic sector. Building a mechanism to lead remittance to the industrial sector is necessary for promoting Foreign Direct Investment (FDI).

However, the current situation in Nepal has several problems with regards to introducing FDI: a) lack of infrastructure b) complicated procedures c) labor disputes and d) lack of awareness among investors. Many Japanese businesses don't recognise Nepal as a potential place for business but simply as a nice place to visit for sightseeing so far.

From the point of view of foreign companies including, Japanese companies, India and Bangladesh are also candidates for investment in South Asia. Therefore, the Nepal government should recognise that Nepal must be competitive among these countries in order to get FDI. I welcome the great efforts of the Nepal government to introduce Investment Year 2012-13 and expect the establishment of a investment friendly environment next year.

In addition, when we discuss in Japan a new development project in Nepal, the political stability of this country is the main issue. I hope that the Nepal government will resolve its political issues in the near future, as this will definitely help promote more Japanese ODA and private investment in the future.

Japan's cooperation with Nepal has traditionally been on physical infrastructure, is there an effort to reorient this to more direct poverty-alleviation efforts?
The Government of Japan has supported Nepal for the last four decades, prioritising poverty reduction, sustainable growth and peace-building. It is true that we think physical infrastructure is very important. Without roads, people cannot access schools, hospitals and markets. Without water supply, people cannot live their everyday lives safely. Without electricity, children find it hard to study at night, small businesses find it hard to operate, and people lack access to unbiased information. We believe that basic infrastructure contributes a lot to poverty alleviation. Besides, large infrastructure projects create huge local employment. For example, about 1,500 local people are employed in the Sindhuli Road Project at present.

Additionally, Japan is very active in the area of technical cooperation. We think human capacity development is also important for poverty reduction. As of the 2010, Japan has dispatched 1,891 experts and 1,171 volunteers to Nepal. They have worked with Nepali counterparts and local people. And we have received 4,848 Nepali trainees in Japan. As a close friend, Japan will continue this kind of support as a sustainable way of poverty reduction.

Is the tragic earthquake tsunami disaster in Japan going to lead to cutbacks on Japanese overseas development assistance (ODA) to Nepal?
It is true there was some delay in the ODA procedure just after the disaster. At present, however, the disaster is not having any influence on ODA. Even in the rough period, we didn't reduce the ODA in Nepal. Japan, at this time received a lot of heartfelt support from many countries all over the world, including Nepal. Through this tragic disaster, the Japanese people came to realize how valuable help is when we are in trouble. We would, therefore, like to continue our support to Nepal.

Your previous tenure was in Sri Lanka. What are the lessons that would be relevant from that country in managing the post-conflict situation?
I found that more and more foreign tourists are coming to Sri Lanka now after the end of the conflict. This fact shows the importance of peace and stability to realize economic development. This is even more true with Nepal, because tourism, which is easily affected by political or social instability, is the most important industry in Nepal. So I hope the government and the people of Nepal make every effort to maintain and promote sustainable peace and stability in this country.

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