Nepal should pursue a country-wise trade promotion strategy, study saysAccording to the Department of Customs, exports made up only 7.5 percent of the country's total trade in the last fiscal year.
A task force formed to plan Nepal’s response to the changing dynamics of global commerce and utilise the free trade privileges given to the least developed countries has recommended adopting a country-wise trade promotion strategy and sorting out obstacles through bilateral talks.
In the last fiscal year, Nepal exported goods valued at Rs97.70 billion while its imports came to Rs1.19 trillion. The Department of Customs said exports made up a mere 7.5 percent of Nepal's total trade in the last fiscal year ended mid-July.
Despite the huge potential, Nepal’s export performance has been eroding due to lack of infrastructure, technology, skilled manpower, quality and standards, and market promotion.
The task force led by Devi Prasad Thapaliya, under secretary at the Ministry of Industry, Commerce and Supplies, has prepared a study report of potential markets like India, China, Bangladesh, Japan, the United States, the United Arab Emirates, Turkey and the European Union. The panel has explained why Nepal’s exports are falling in particular markets and what needs to be done to boost shipments.
According to Thapaliya, amendments need to be made to a number of laws and policies. “But before that, Nepal needs to increase domestic production. There are issues regarding the quality and standards of products and lab capacity.”
The certification standard for tea, large cardamom, fresh ginger, sutho and powder is being done in Kolkata or Patna in India, which are a long distance from Nepal. And there is also a mandatory test that has to be done in a food lab in Lucknow which takes 30 days and costs IRs3,000 for each sample, according to Nepali traders.
Nepal is working to secure accreditation of Nepali labs so that longstanding hassles of getting goods tested and certified at Indian labs will end, they said.
Regarding the production of exportable goods, foreign investment will be encouraged in industries that use local raw materials to increase exports, said Thapaliya.
The ministry will soon operate a Trade Information Portal to provide easy access to information about international markets and prices, products that have high demand, the process that need to be followed to export goods, and laws and regulations related to export, according to Thapaliya.
Nepal will intensify bilateral talks with India for the maximum utilisation of customs facilities to which it is entitled as a least developed country by signing a Mutual Recognition Agreement, he said.
“Amending the transit protocols will enable Nepal’s railway to run to Kolkata. Similarly, a provision will be made to bring Indian private railway service to Nepal.”
Bangladesh has been imposing customs duty, regulatory duty, supplementary duty, value added tax, advance income tax, advance trade value added tax and other duty charges on Nepali exports due to which they are not competitive in the Bangladeshi market.
Nepal applies customs duty and VAT on goods imported from Bangladesh, and it will conduct negotiations to remove extra charges, he said.
The task force said that Nepal exports large quantities of wheat and vegetable by-products to India. There is a huge potential for exporting such goods to Bangladesh if para-tariff (border charges and fees) and non-customs charges are removed. Green vegetables and fruits produced in Nepal like cabbage, cauliflower, tomato have a huge potential market in Bangladeshi.
Readymade garments, woollen carpets, pashmina, tobacco related products and other readymade food items are major items exported to the UAE.
To encourage the private sector to engage in commercial farming, contract farming and implementation of public-private partnership in the agriculture sector has been suggested.
No customs duty is levied on the export of cardamom to the UAE, but there are many non-tariff barriers. Negotiation should be held for promoting organic products, lab test certification, labelling and branding and other non-customs obstacles in the UAE.
“The export of footwear, copper goods, jute bags and gold and silver jewellery face minimum customs obstacles. Shipments can be increased by improving design, labelling and packing,” said Thapaliya.
Yarn is a major export to Turkey as a result of the zero customs service under the generalised system of preferences. To increase shipments, the Nepal government should establish a relationship with the Turkish government to facilitate exports, the report said.
As Turkey provides zero customs facility on woollen carpets under the generalised system of preferences, there is a huge potential for export. “It is important to increase production and markets for woollen carpets and improve the quality,” according to the report.
To increase Nepali exports to Japan, a detailed work procedure should be conducted by the ministry in cooperation with the Japan International Cooperation Agency for market access, the report recommended.
Nepal plans to request the Japan External Trade Organisation for technical support to increase trade.
Japan provides duty-free, quota-free access to the least developed countries like Nepal. Exports to Japan can be increased as it provides zero customs service for Nepali-made products, the report said.
As Japan examines the certificates and labelling of imported goods strictly, a request will be made to the Japanese Society for Quality Control to provide technical assistance to enhance the lab capacity of Nepal and training to Nepali personnel, said Thapaliya. “This is important for the promotion of agricultural products, herbs, handicraft goods, pashmina shawl, woollen carpet, readymade garment.”
Carpets are one of the major goods exported to the United States, making up almost half of Nepal's total exports to the country. In 2019, Nepal was the fourth largest exporter of carpets to the US, according to the Export Rank Position of International Trade Centre.
Exports to the US can be increased if high quality handmade carpets are produced in traditional styles, the government panel said. Almost all of the readymade garments produced in Nepal are exported to international markets. They are Nepal's second largest export to the US.
The US levies 14 percent customs duty on readymade garments, and it is important to request the US government to remove the duty, the report said.
Products like felt have a huge potential market in the US. The US imposes 8 percent ad valorem tariff on felt products, and this needs to be removed.
There is high demand for handmade goods in the US, and since no customs duty is levied on them, Nepal can export goods like paintings, drawings and pastels.
There is also good demand for copper and related products, and their exports can be increased and promoted.
There is huge potential for exporting beer to the US market, the report said. Natural honey, dried mushroom, tea and coffee also have good demand in the US market.
With regard to exporting to China, there is a problem with banking transactions. Traders encounter difficulties exporting goods through the Tatopani and Kerung border points as per the Nepal-China trade agreement, the report said. Nepali goods have limited access to the Chinese market due to lack of promotion, the study revealed.
For the export of Nepali goods to the countries of the European Union, especially Germany, London and France, a Mutual Recognition Agreement needs to be made, the report said.