Government aims to boost export to Rs 100 billion

Despite the gloomy external trade scenario, the government has again promised to boost exports to up to Rs 100 billion in the current fiscal year by improving production, processing and packaging of agriculture goods.

The country had exported merchandise worth Rs 74.26 billion in the last fiscal year.

"The government has a target to boost exports to over Rs 100 billion in the current fiscal year," said secretary at the Prime Minister's Office and Council of Ministers Krishna Hari Baskota while evaluating the performance of the Ministry of Commerce and Supplies.

"We have to lay emphasis on goods featured in Nepal Trade Integration Strategy (NTIS)," he said, adding that all the 19 goods and services should add to over Rs one billion.

NTIS has identified seven agricultural, five industrial, and seven service sector goods as export potential, though the government's repeated promise of boosting their exports has fallen flat due to the energy crisis and labour troubles arising from political backing.

"The government is ready to facilitate the export process by simplifying cash incentive, unhindered transportation facility for containers, and attracting investments in the production sector," he said, adding that the agricultural sector has a huge potential for export.

The country has exported ginger worth Rs 280 million, handmade paper (Rs 450 million), honey (Rs 700 million) and herbs (Rs 1.54 billion).

"The government has been trying to improve the quality of items exported to the European and American markets," said secretary at the Ministry of Commerce and Supplies Lalmani Joshi. "We are working on to register the trademark of Nepal Tea in the international market," he said, adding that work on eliminating pesticide residue in honey is also ongoing.

The country has to simplify duty draw back facility to promote industrial goods, Joshi added.

Last year, industrial production — iron and steel — worth Rs 10 billion was exported from the country. Similarly, around Rs four billion worth of pashmina was exported, following the registration of the 'Chyangra Pashmina' trademark in 40 countries. "We will soon add seven countries," he said.

The country has also exported musuro pulse worth Rs 3.34 billion, and large cardamom worth Rs 2.21 billion. However, production of cardamom has decreased due to the Chirkephurke disease since a few years back.

Despite the government's repeated efforts, exports have not picked up but at the same time, imports are increasing significantly, widening the trade deficit. The country witnessed merchandise exports of Rs 20.73 billion in the first three months of the current fiscal year, whereas in the same period, the country has imported merchandise worth Rs 136.48 billion resulting in a trade deficit of Rs 115.75 billion.

Exports

Fiscal year — Export

2002-03 — Rs 50.01 billion

2003-04 — Rs 53.95 billion

2004-05 — Rs 58.44 billion

2005-06 — Rs 59.78 billion

2006-07 — Rs 58.93 billion

2007-08 — Rs 58.47 billion

2008-09 — Rs 68.60 billion

2009-10 — Rs 60.95 billion

2010-11 — Rs 64.56 billion

2011-12 — Rs 74.26 billion

(Source: Trade and Export Promotion Centre)

Recruitment agencies must prioritise protection of migrant workers

At a time when Nepal's development partners like World Bank and UN are suggesting the government for a strong migration and remittance policy to take benefit from increasing migration, Amnesty International has shown concern over Nepal Association of Foreign Employment Agencies (NAFEA)'s activities.

"Nepal Association of Foreign Employment Agencies is against the implementation of the existing rules related to labour migration set by the Department of Foreign Employment, which is a serious issue," said Amnesty International.

NAFEA officials have been saying that 'stricter rules' in securing job permits from the department had discouraged recruitment agencies from sending workers abroad. They claim that the drop in migration figures reveals that many are now going abroad through informal channels via India, contravening the law of the land.

"NAFEA’s remarks are not helpful to the ongoing efforts by civil society, and governmental and inter-governmental agencies to promote safe migration," said director of Amnesty International Nepal Rameshwar Nepal, adding that the government's priority should be to protect migrant workers, not ensure high profits for recruitment agencies by processing migration applications as quick as possible.

"Procedures put in place by the government aimed at reducing contractual deception, including translation of contracts into Nepali, should, if implemented properly, contribute towards reducing the widespread practice of recruiters trafficking migrants for forced labour," he added.

Amnesty International’s research clearly revealed that using informal migration routes puts migrant workers at greater risk of exploitation. "If the drop in migration correlates with an increase in migrants travelling via India to circumvent the formal system, then this is indeed cause for concern," said Nepal, urging better cooperation between agencies and the governments of both Nepal and India to protect migrant workers, including penalties for rogue recruiters who violate the law.

Amnesty International has also called on all political parties to sign up to key safe migration policies that will help protect millions of Nepalis, who go abroad for work.

This is an issue that impacts the whole nation and needs a response that crosses party political lines, according to Amnesty that said that it is no longer acceptable for politicians to ignore the issue or for recruitment agencies to circumvent or flout existing laws.

Amnesty International has prescribed to ensure that laws banning excessive interest rates are enforced, apart from ensuring the effectiveness of the Foreign Employment Act as a tool against trafficking for exploitation and forced labour by punishing recruitment agents violating the Act.

Similarly, it has also asked to ensure that the complaint and compensation mechanisms are accessible to migrants and their families and ensure women, who wish to migrate, do not face discriminatory restrictions in the migration process, to release reserves in the Welfare Fund to finance low interest loans for migrants and enterprise assistance for returnees, and to ratify the UN Trafficking Protocol and ensure Nepal’s domestic law on trafficking covers labour exploitation.

Nepal second largest remittance receiver among LDCs

Nepal is the second largest remittance receiver among the Least Developed Countries (LDCs), according to a latest United Nations report.

"Of the total $27 billion remittance received by LDCs in 2011, Nepal stands second to Bangladesh," said the Least Developed Countries Report 2012 'Harnessing Remittance and Diaspora Knowledge to Build Productive Capacities', released here today.

The top three recipients — Bangladesh, Nepal and Sudan — shared 66 per cent of total remittance inflow to LDCs, it said, adding that from 2009 through 2011, Nepal and Haiti received more foreign exchange from remittance than from exports.

"Nepal's remittance equals trade deficit as a share to the gross domestic product (GDP). Likewise, remittance exceeded both Foreign Direct Investment (FDI) and Official Development Assistance (ODA) in 2008-2010 exceeded in nine LDCs; Bangladesh, Haiti, Lesotho, Nepal, Samoa, Senegal, Sudan, Togo and Yemen."

"However, the widening gap between FDI inflow and remittance inflow has to be taken seriously," said senior economist at the UNDP Basudeb Guha-Khasnobis making his presentation.

"Though remittance has helped reduce poverty, it has also been instrumental in widening the rich-poor gap," he said, adding that a good remittance policy will not only help reduce the cost of remittance but also the cost of migration.

"Generally, a Nepali worker has to pay $1,200 to migrate to Qatar," he added. "As a skilled and professional migrant normally does not remit, cost reduction for migration will help low income people have easy access to migration that will increase remittance inflow," he suggested.

The brain drain rate — that is the share of highly skilled nationals living abroad — is considered 'high' as it stood at 20 per cent in 30 LDCs out of 48 LDCs, the report highlighted, estimating that two million university-educated persons from LDCs live and work abroad.

However, brain drain can be reversed, opined central bank governor Dr Yubaraj Khatiwada, releasing the report.

"Apart from thinking of how to attract professionals and skilled people to remit, brain drain could also be reversed to brain gain, if the government can create an encouraging environment for the return of migrants, who have expertise, skills and knowledge that could help their originating countries," he said, adding that the current NRN Act also needs to be revisited to encourage Non-Resident Nepalis to return to Nepal.

"However, LDCs like Nepal must prepare for alternative sources to finance consumption, in case remittance inflow slows down," he added. "Likewise, countries like Nepal should be prepared for price shocks — that has increased the cost of living — financial shocks, and keep gauging increasing vulnerabilities. Remittance is an indicator to gauge rising vulnerabilities of Nepal too."

Likewise, LDCs have failed to build trade capacity despite the World Trade Organisation's (WTO) facilities on exports from these countries, the central bank governor opined, adding that Aid for Trade could also be a tool to help increase capacities of LDCs like Nepal, besides effective mobilisation of resources by proper utilisation.

Senior economist Prof Dr Biswambher Pyakurel sought a diagnosis of the structural problem of the Nepali economy before prescribing any pill for the ailing economy.

ADB to help South Asia in intraregional trade

The Asian Development Bank (ADB) will provide $48 million to help goods move more smoothly in and out of Bangladesh, Bhutan, and Nepal, by overhauling time-consuming, costly, and often opaque customs procedures that are inhibiting intraregional trade.

"Removing the many non-tariff barriers which currently impede trade will have a major multiplier effect on trade volumes across South Asia," said Public Management specialist in ADB’s South Asia Department Emil Bolongaita. "Automated, user-friendly, transparent customs systems will cut business costs, reduce informal activity and give a real lift to importers and exporters, including women entrepreneurs."

The project will help the three countries, all members of the South Asia Subregional Economic Cooperation (SASEC) programme, adopt an international customs administration protocol, upgrade existing automated customs management systems, and establish web-based electronic trade portals. The measures will also give importers and exporters timely and accurate information.

India, which is also a SASEC member, is not included in the programme as it is funding its own trade facilitation reforms and is significantly ahead of its neighbours in the region.

Despite healthy growth, South Asia’s low levels of intraregional trade make it one of the least integrated regions in the world. Processing and export delivery times are more than 30 per cent lower than in East Asia and the Pacific, while administrative fees and storage and handling costs are more than 40 per cent costlier. Weak logistics systems, poor infrastructure and a lack of cross-border transit agreements are other impediments to trade which is nearly all land based.

Informal trading has sprung up to avoid excessive documentation and goods inspections, resulting in sizeable government revenue losses. The introduction of international customs practices, streamlined management systems including the planned establishment of 'single window' systems to simplify transactions and web-based information for traders, will make cross-border trade more efficient, cost-effective, transparent and secure.

The programme, which targets a 7.5 per cent rise in intraregional trade volumes by 2018, will complement SASEC cross-border transport projects to improve connectivity, and planned investments in projects across the transport, trade facilitation and energy sectors.

ADB, which acts as the secretariat for SASEC, has already provided $3.4 billion and has more commitments in the pipeline.

The sub-regional group, SASEC, was set up in 2001 as an initiative of Bangladesh, Bhutan, India, and Nepal. It aims to promote domestic and regional prosperity through stronger transport links and increased trade and cooperation across sectors ranging from energy, tourism, private sector and environment.

Agriculture Inputs Company in borrower exception list

The single obligor limit will not be applicable for loans provided by commercial banks to Agriculture Inputs Company to purchase chemical fertilisers.

The central bank has included Agriculture Inputs Company on the list of its exception of single borrower limit of 30 per cent of the bank's capital. Earlier, Nepal Oil Corporation (NOC) and Nepal Food Corporation (NFC) were in the list.

The central bank had earlier only mentioned the names of these public enterprises. However, now the central bank has also spelt out the type of loans that fall in the exception category.

The loan obtained by Agriculture Inputs Company Ltd for purchasing fertilisers, NOC for purchasing fuel and petroleum products, and NFC for purchasing food and cereals fall under the exception category.

This year, during the plantation season, the delay by the government in purchasing fertilisers had left many arable lands untilled which will affect national food production.

Banks cannot provide loans amounting to more than 30 per cent of its total capital for productive and export industries.