Nepalese Experience on Trade Related Capacity Development

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 !