Binod Prasad Acharya

1
Nepalese Experience on Trade Related Capacity
Development

• Presented by
• Binod Prasad Acharya
• Under Secretary
• Ministry of Industry, Commerce Supplies,
• Government of Nepal

2
G e n e r a l O v e r v i e w
(based on 2006-07 figures)

• A landlocked LDC with a population of 26.4
  million located between India and China-offers
  opportunities to trade.
• Agro-based Economy with per capita GDP US 383
• Major resources- agriculture, hydropower, tourism

• Export - 844 million (carpets, garments,
  handicrafts, lentils, jute goods, etc.)
• Import - 2824 million (petroleum products,
  machinery and equipments, wool etc.)
• Trade Deficit- 1980 million.

• Major Trading Partners -
• Exports-India (70.9), USA(9.4), Germany(4.3)
• Imports-India(59.6),China(8.9),East
  Asia(13.4)

3
C h a r a c t e r i s t i c s o f T r a d e

• Since late 1980s, the country adopted policy of
  economic liberalisation and reforms. Reforms
  consisted of greater private sector participation
  in the economy through privatisation of state
  owned enterprises, interest rate deregulation,
  elimination of import licenses , convertibility
  of Nepalese currency in current account, etc.
• Structural changes in trade as the share of
  primary goods declined from 70 in early 1980s
  to 17 in 2000.
• Destination of exports and sources of imports
  limited to a few destinations.

• Export base is dependent on labour intensive
  manufacturing and diversified agriculture.

4
(Continued)

• Competitiveness of the products eroded due to low
  labor productivity, poor quality of products, and
  high transaction costs.
• Geographical constraints- only 20 arable land,
  difficult terrain, fragmented production centers
  and long distance to sea port (660 miles).
• Higher transit and transportation costs
• Difficulties in identification and development of
  potential niche products and markets.
• Inadequate legal and institutional provisions to
  support the export led growth.

5
T r a d e P o l i c y - 1 9 9 2

• promoting internal and international trade with
  the increased participation of private sector,
  promotion of backward linkages for making the
  export competitive and sustainable, gradual
  reduction of trade imbalances and expanding
  employment oriented trade.
• export and import policies and strategies,
  decontrol of import licensing and emphasized on
  promoting interrelationship between industry and
  trade through promotion of quality in production,
  adoption of appropriate technology and market
  development, and creating investment friendly
  environment.
• institutional arrangement -Board of Trade,
  Foreign Trade Policy and Research Institute and
  NTPO.
• Deemed export for sale of products to projects
  run under foreign assistance and sale of products
  to EPZ.

6
C h a n g i n g D i m e n s i o n s of T r a
d e

• Development of trade related infrastructures-ICDs,
  and railway connectivity.
• Customs reform and modernization.
• Private sector development through support to
  FFs, transport operators and terminal operators,
  for improvement in trade logistics.
• DTIS study for trade related technical assistance
  -2003.
• PRSP formulated in 2003 based on four
  pillars-broad based high and sustainable growth,
  social sector development, social inclusion and
  improved governance.
• Nepal joined WTO, SAFTA and BIMSTEC in 2004.

7
C h a n g i n g D i m e n s i o n s of T r a
d e
(continued)

• Sub-regional initiatives on trade and transport
  under the framework of SASEC.
• Phase-out of MFA and its impacts on Nepalese
  apparel.
• Erosion of preferences for Nepalese exports to
  India due to tariff rationalization under SAFTA
  and other trade agreements of India.

8
Multilateral Regional Commitments

• Commitments during WTO accession
• Goods tariff binding in almost all tariff lines.
  Bound tariff 42 percent in agriculture and 24
  percent in non agriculture.
• Out of 160 sub sectors classified by WTO on
  services sector, Nepal has made commitments to
  liberalize 70 sub sectors including financial and
  telecommunication services.
• Reform in the legal infrastructure are being
  carried out in course of making them compatible
  to WTO requirements.
• Tariffs are being rationalized in accordance with
  SAFTA commitments. Review in the number of
  sensitive lists with a view to reduce the number
  of items.

9
Multilateral Regional Commitments
Contd..

• SRMTS completed in course of developing transport
  connectivity.
• Agreement on customs cooperation signed.
• WG on NTMs and para-tariff measures is taking up
  the negotiations.
• Efforts are underway to create the regional
  standards body for development and harmonization
  of TBT issues.

10
Needs - Trade Related Capacity Development (1)

• Enhancing productive capacity of the farms and
  enterprises.
• High value agriculture and NTFP
• Labor productivity enhancement
• Entrepreneurship development and promotion
• Identification and development of niche products
  suited to regional markets.
• Trade related Infrastructures
• Development of road network to connect
  production centers and market and their link to
  national highways
• Electricity power generation, transmission and
  distribution to industrial areas
• Establishment of Inland Container Depot/Container
  Freight Station/Special Economic Zone
  (ICD/CFS/SEZ near border points

11
Needs (2)

• Laboratories in major industrial locations in
  order to ensure quality production and meet SPS
  and TBT standards.
• Develop alternate corridors in transit for
  bringing down the cost of trade.
• Institutional Development
• Structural reforms such as establishment of a
  foreign trade institute/ entrust the existing
  Trade and Export Promotion Center to assume the
  new role through its capacity enhancement.
• Modernization of Customs with equipments, trained
  manpower as well as with advanced procedures.
• Legislative and procedural reforms
• Strengthening Information system for providing
  reliable data and trade statistics.

12
Needs (3)

• Human Resource Development
• Training and orientation to government staffs as
  well as business entities to enhance their
  knowledge, skills and productivity
• Building up negotiating capacity to deal with
  bilateral, regional and multilateral trade
  negotiations.
• Interventions at the enterprises level.
• - Provide the entrepreneurs with adequate
  market information, knowledge, skills and
  information technology in order to increase their
  competitiveness
• - Support them to adopt, use and maintain
  appropriate technology.

13
Assistance for TRCB

• Some modest assistance received under IF,
  channeled through UNDP. Assistance limited to
  some studies and production of reports.
• Assistance is being provided by GTZ and UNIDO for
  TBT/SPS, EU, Asia Trust Fund provided assistance
  for identifications of potential agricultural and
  forest products.
• Bilateral and multilateral donors are also
  putting their efforts in HRD and training for
  capacity enhancement.
• DTIS update is now on agenda. It is expected to
  start soon with the assistance of development
  partners.

14
Assistance for TRCB (contd..)

• Issues
• Level of assistance is too meager in comparison
  to needs.
• Assistance focuses more on study and reports
  rather than implementation.
• Such assistance have little impact at the grass
  root and farm level.
• Hence
• Reorientation is required with more focus towards
  enhancing the supply side of LDCs through
  interventions at the enterprise or farm level and
  many fold increment of resources from the current
  level.

15
Thank You !