Nepal-Bhutan plan trade agreement

After a successful signing of economic framework agreement with the US, Nepal is gearing to enter into a trade pact with Bhutan.
Thimpu had shown interest in signing a trade treaty with Kathmandu since eight year ago, though the South Asian countries have no huge volumn of trade between themselves.
With the recent visit of the Bhutanese Prime Minister Jigme Y Thinley, the trade pact between the two countries seems to get started again.
The two countries will soon ink a deal since there has already been an agreement in principle to this effect, according to Ministry of Commerce and Supplies that has been given the responsibility to prepare draft of trade agreement with Bhutan.
During the second joint secretary level meeting in October 2010, both the countries has agreed to work out issues regarding list of exportable products from both the countries including trade routes and business procedures.
The November 2010 meeting explored some opportunities to boost bilateral trade as they discussed modalities for the formal trade treaty that could be later on developed as various preferential treatment required for the bilateral trade.
Bhutan’s export to Nepal during 2008-09 was around Rs 300 billion whereas Bhutan’s import from Nepal was at Rs 200 million. The growth of trade between the two nations has been affected by the refugee crisis.
India is the largest trading partner of Bhutan but the dynamics could change, if the trade treaty between Thimpu and Kathmandu is signed.
Although both the countries has informal trade, they never had bilateral trade agreement.
Bhutan and Nepal are both signatories to South Asia Free Trade Agreement (SAFTA) under which they can still trade but the intra-regional trade of South Asia never exceeded five per cent.
Bhutan's economy -- one of the world's smallest and least developed -- is based on hydroelectricity, tourism, agriculture, and forestry. Rugged terrain makes it difficult to develop roads and other infrastructure. Despite the constraint, hydroelectricity and construction continue to be the two major industries of growth for the country. As these two economic sectors contribute to increased productivity, Bhutan's development prospects are positive.
The Tala hydroelectric project, completed March 2007, has bolstered government revenue and exports, and will continue to do so for the next several years. In late 2009, Bhutan signed four memoranda of understanding (MOUs) with India to prepare four additional hydroelectric projects in Bhutan.
Bhutan's economy has been on an upturn due to recent sub regional economic cooperation efforts. Already this plan has strengthened the current trade relations with India, as well as opened an avenue of trade with Bangladesh. In May 2003, the Bilateral Free Trade Agreement between Bangladesh and Bhutan was re-signed. Bangladesh is Bhutan's second largest trade partner, after India.
In January 2004, as a member of the South Asian Association for Regional Cooperation (SAARC), Bhutan also joined the South Asian Free Trade Agreement (SAFTA); Bhutan hosted the SAARC summit in Thimphu last April.
In February 2004 Bhutan joined the Bangladesh, Indian, Myanmar, Singapore, and Thailand Economic Cooperation Forum (BIMSTEC). Bhutan has applied for membership in the World Trade Organisation (WTO) and is in the process of developing clear legal and regulatory systems designed to promote business development with the Nepal.
Bhutan's major trading partners are India, Hong Kong, Japan, Germany, Singapore, and Thailand.

ASA revision
KATHMANDU: Nepal and Bhutan are revising Air Service Agreement soon. The two sides reached an agreement during a meeting between Prime Minister Jhala Nath Khanal and his Bhutanese counterpart Jigme Y Thinley. The visiting Bhutanese premier before wrapping up his three-day official visit to Nepal, said they have agreed to renew the air service agreement which will include Druk Air flghts between Bagdora in India and Kathmandu. "The government of India has given their approval to operate such a flight with fifth freedom rights," he said. Currently, Druk Air has Kathmandu-Thimphu flights four times a week.