AI Diplomacy: Nepal Must Place AI as a Foreign Policy Priority

Artificial Intelligence (AI) has made significant progress in machine learning, neural networks, and natural language processing over the years. However, the launch of ChatGPT in November 2022 revolutionized the field, bringing AI to millions of people worldwide and making it a hot topic of discussion. This mainstreaming of AI further proliferated its innovation, development, and deployment, with global leaders quickly realizing its immense transformative potential.

Since then, tech companies and states alike have poured billions of dollars into AI research, innovation, and infrastructure, triggering what many see as a global AI race. In early 2025, when a lesser-known Chinese tech lab DeepSeek released its R1 model at a fraction of the cost of OpenAI’s ChatGPT, many saw it as AI’s “Sputnik Moment,” where China appeared to offer a credible challenge to the U.S. dominance of AI development despite export restrictions on the most advanced AI chips by the U.S. Undoubtedly, this episode highlighted superpowers’ growing acceptance of AI supremacy as a key strategic national interest.

This realization has been widely acknowledged because, unlike most other technological innovations of the past, AI has displayed an unprecedented potential to transform society, politics, and the economy, both positively and negatively. While its application in healthcare, scientific research, education, agriculture, technology, and other service sectors has provided fresh optimism for progress and productivity, its potential to disrupt social cohesion and increase political polarization with the help of AI tools and techniques, including deepfakes and coordinated disinformation campaigns, has alarmed many.

Automation-led job displacement, ethical concerns stemming from bias and data privacy issues, and technological limitations of recommender algorithms in search engines, job portals, and e-commerce platforms are some other commonly cited grievances against AI. From a security perspective, advanced AI models and tools provide countries with strategic and tactical advantages through military modernization; the widespread use of drones and precision-guided munitions in the Russia-Ukraine war, the Israel-Hamas war, and the Iran-Israel war offers good examples of how AI technology has not only been transforming the nature of wars but making AI dominance essential for geopolitical supremacy.

Consequently, the broader strategic competition between the U.S. and China features AI as an increasingly crucial factor. The two countries’ respective efforts around AI, including their separate UN resolutions on AI and the formation of loose alliances, signal a world roughly polarizing into two blocs: the U.S.-led democratic model versus China’s state-driven approach.

While more resourceful countries like India, the UK, and France have adopted a more cautious approach—developing their own AI capabilities while also pursuing necessary collaborations—smaller countries like Nepal, caught in the middle of this competition, have had to navigate their strategic choices between the competing AI ecosystems. This underscores a particular urgency for Nepal to strategize, develop, and implement a robust policy around AI.

At CESIF, I recently led a research project on Artificial Intelligence and Diplomacy: A Case for Nepal’s AI Diplomacy, which explored some of these issues and made a case for AI diplomacy for Nepal. Despite AI’s immense potential for economic growth and development, Nepal’s limited digital infrastructure, lack of skilled workforce, and data scarcity necessitate effective bilateral cooperation with regional and global powerhouses, as well as active diplomacy at multilateral platforms, to benefit from AI’s advancement.

Proactive AI diplomacy is also essential to ensure that Nepal’s interests and concerns are appropriately addressed in global AI regulatory and governance efforts from the very beginning. For this, Nepal should leverage its geopolitical position, clean (hydro) energy potential, and LDC leadership to not only attract foreign direct investment in AI and collaborate with key players, but also lobby to establish AI as a public good. This endeavor should pay particular attention to the geopolitical complexities surrounding AI and adopt a neutral approach that prevents Nepal from falling into any exclusive bloc.

Nepal’s national strategy for AI is still at a nascent stage. The country unveiled its first-ever Concept Paper on Artificial Intelligence in July 2024, following which it released the National AI Strategy in February 2025. Its vision for AI-driven digital transformation—with sectoral emphasis on agriculture, healthcare, education, tourism, and governance—is a welcome step toward AI adoption. Similarly, its effort to promote AI research, innovation, and ethical regulation nationally, as well as to encourage FDI and public-private partnerships, is commendable.

However, a lack of a clear roadmap for implementation, infrastructure and skill gaps, and little emphasis on diplomacy and international cooperation around AI risks poor materialization of the stated goals. Instead of treating it as just a tech issue, Nepal must place AI as a foreign policy priority and push for a cohesive AI strategy that links domestic AI innovation, development, and regulation with international diplomacy.