Export of high-value products – identified by Nepal Trade Integration Strategy (NTIS) – dropped by 6 per cent year-on-year to Rs14.8 billion in the first five months of the current fiscal year, though government has prepared the NTIS list with much hope and expectation.
The government – with the help of development partners – has prepared NTIS 2016, the third-generation trade integration strategy, with nine high-value products and three services to bridge the ballooning trade deficit. However, a non-NTIS product – palm oil – has topped the list of export basket failing the government’s home work of years.
According to the Trade and Export Promotion Centre (TEPC), palm oil exports contributes to 25 per cent of the total exports as it rose to Rs 11.5 billion – in the first five months – also nearly eight times the amount shipped in the same period last year.
Tariff exemptions on Nepali exports to India under the South Asian Free Trade Area (SAFTA) Agreement have domestic traders an incredible advantage. As countries outside of South Asia are slapped with tariffs of 54 per cent on palm oil and 45 per cent on soybean oil, Nepali traders took the advantage of tariff difference to push exports of palm oil and soybean oil to India, according to the World Bank Nepal Development Update released in December. “Nepal capitalised on the arbitrage opportunity and significantly increased exports of the two products,” it reads, adding that it might, however, not be a sustainable option in the long run. “The export performance of products under the NTIS including all fabrics, textile, yarn and rope, cardamom, carpet, footwear, ginger, leather, medicinal and aromatic plants, pashmina, and tea was dismal in the last fiscal year, contracting by 4.8 per cent year-on-year compared with an expansion of 17.9 per cent year-on-year in the fiscal year 2017-18.”
The high-value products – under NTIS – also dropped due to a fall in production, eroding competitiveness of Nepali products because of lack of inspection and quality checks. Though, large cardamom exports soared by 50.7 per cent to Rs 1.86 billion, shipments of all other products including ginger, tea, medicinal and aromatic plants, fabrics, yarn, textiles, rope, leather, footwear, pashmina and carpets were down, compared to the same period last fiscal year.
Exports of pashmina – one of the ‘pride products’ – declined by 17 per cent to Rs 1 billion due to a lack of effective branding and promotional activities in the international market.
The TEPC data reveals that ginger exports slipped by 14.65 per cent to Rs 236 million, whereas tea plunged by 24.88 per cent to Rs 1.45 billion despite 5 per cent cash incentive on exports of processed tea, large cardamom, ginger, leather goods, processed medicinal herbs and oil products with value addition of at least 50 per cent.
According to the World Bank, Nepal’s export value to GDP ratio reached 1.1 per cent, lower than the 4 per cent target set for 2020, due to a lack of raw materials, skilled manpower and required infrastructure like processing centres, lab testing and storage facilities.
The sharp rise in exports of palm oil, which has no ‘value addition’, could largely impact Nepali farmers as it could offset the demand for Nepali products but traders keep exploiting easy loopholes on foreign products that yield them higher profits, and the incumbent government is also encouraging them to show off the increased exports during its tenure.
Time and again, traders have been taking advantage of the duty difference but it has not been sustainable business as there have been instances of betel-nut, vegetable ghee, and many more.
The government – with the help of development partners – has prepared NTIS 2016, the third-generation trade integration strategy, with nine high-value products and three services to bridge the ballooning trade deficit. However, a non-NTIS product – palm oil – has topped the list of export basket failing the government’s home work of years.
According to the Trade and Export Promotion Centre (TEPC), palm oil exports contributes to 25 per cent of the total exports as it rose to Rs 11.5 billion – in the first five months – also nearly eight times the amount shipped in the same period last year.
Tariff exemptions on Nepali exports to India under the South Asian Free Trade Area (SAFTA) Agreement have domestic traders an incredible advantage. As countries outside of South Asia are slapped with tariffs of 54 per cent on palm oil and 45 per cent on soybean oil, Nepali traders took the advantage of tariff difference to push exports of palm oil and soybean oil to India, according to the World Bank Nepal Development Update released in December. “Nepal capitalised on the arbitrage opportunity and significantly increased exports of the two products,” it reads, adding that it might, however, not be a sustainable option in the long run. “The export performance of products under the NTIS including all fabrics, textile, yarn and rope, cardamom, carpet, footwear, ginger, leather, medicinal and aromatic plants, pashmina, and tea was dismal in the last fiscal year, contracting by 4.8 per cent year-on-year compared with an expansion of 17.9 per cent year-on-year in the fiscal year 2017-18.”
The high-value products – under NTIS – also dropped due to a fall in production, eroding competitiveness of Nepali products because of lack of inspection and quality checks. Though, large cardamom exports soared by 50.7 per cent to Rs 1.86 billion, shipments of all other products including ginger, tea, medicinal and aromatic plants, fabrics, yarn, textiles, rope, leather, footwear, pashmina and carpets were down, compared to the same period last fiscal year.
Exports of pashmina – one of the ‘pride products’ – declined by 17 per cent to Rs 1 billion due to a lack of effective branding and promotional activities in the international market.
The TEPC data reveals that ginger exports slipped by 14.65 per cent to Rs 236 million, whereas tea plunged by 24.88 per cent to Rs 1.45 billion despite 5 per cent cash incentive on exports of processed tea, large cardamom, ginger, leather goods, processed medicinal herbs and oil products with value addition of at least 50 per cent.
According to the World Bank, Nepal’s export value to GDP ratio reached 1.1 per cent, lower than the 4 per cent target set for 2020, due to a lack of raw materials, skilled manpower and required infrastructure like processing centres, lab testing and storage facilities.
The sharp rise in exports of palm oil, which has no ‘value addition’, could largely impact Nepali farmers as it could offset the demand for Nepali products but traders keep exploiting easy loopholes on foreign products that yield them higher profits, and the incumbent government is also encouraging them to show off the increased exports during its tenure.
Time and again, traders have been taking advantage of the duty difference but it has not been sustainable business as there have been instances of betel-nut, vegetable ghee, and many more.
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