Small and medium enterprises (SMEs) have complained that they have not been able to get the cash incentive provided by the government for exporting their products because of lengthy and incomprehensible paperwork.

The government provides a 2 percent incentive on exported goods with a value added percentage of at least 30 percent. 

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Nepal Chamber of Commerce issue certificates of origin verifying the value addition.

Surendra Kumar Shrestha, chairman of Export Council Nepal, said SMEs had not been able to get the incentive provided by the government mainly because they could not complete the complex procedure.Potential recipients need to present official letters from the Industry and Commerce ministries, the certificate of origin and bank documents. “However, many of them fail to fulfill the entire process,” said Shrestha, speaking at a programme organised by the council on Wednesday. 

The government had launched the incentive scheme five years ago in a bid to boost exports of domestic products. Initially, the incentive ranged from 2-4 percent depending on the value added percentage of the export product. 

After exporters complained that calculating the value added percentage was too complicated, the government decided to give a flat 2 percent incentive by categorising the products. 

Following an amendment to the directive in 2013, the government fixed a 2 percent incentive for goods with a value added percentage of at least 30 percent. 

According to the council, the government last year allocated Rs300 million for incentive payments. “Most of the money went to big companies, and a large number of SMEs could not receive the benefits,” said Shrestha. He also asked the government to raise the incentive to 10 percent from the existing 2 percent. 

Pointing to the large export incentives provided by neighbouring countries, traders said they needed to be increased to boost exports. The country’s trade performance has been dismal with falling export earnings and soaring import values.

According to the Trade and Export Promotion Centre, exports have dropped to Rs71.13 billion from Rs91.36 billion in the last three years. On the other hand, the country’s import bill has surged to Rs781.14 billion from Rs722.77 billion over the period. 

Chandi Raj Aryal, president of the Garment Association of Nepal, said Nepali exports failed to perform well due to high production costs. “Small cash incentives, labour problems and bandas have been pushing up production costs. As a result, Nepali products are not price competitive in the international market,” he said. 

FNCCI Vice-President Dinesh Shrestha urged the government to simplify the process of providing export incentives. “Due to the reason, many traders who have been exporting products made by SMEs are receiving the benefits instead of the manufacturers,” Shrestha said.