Palm oil tops the export basket

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. 

Investment in home-based women workers critical for cardamom enterprises

Women home-based workers play significant role in production and processing of large cardamom, according to a World Bank study released today.
Speaking at an event in Kathmandu to launch the report, secretary at the Ministry of Women, Children and Senior Citizen Chandra Prakash Ghimire, said production of large cardamom engaged a larger number of rural people of Nepal. “The study revealed that 90 per cent of the workforce in cardamom cultivation was comprised of women,” he said, adding that Nepal brought out Nepal Trade Integration Strategy (NTIS) in 2010 and 2016 being influenced largely by the theory of comparative advantage. “The second one is still in effect.”
The report ‘Understanding the Role of Women Home-Based Workers in Value Chains of Large Cardamom and Allo in Nepal' determines that large cardamom production is a critical source of livelihood generation for a majority of women home-based workers.
According to the report, women take the lead in nurturing and harvesting the crop before it travels through local markets and trading centers, from where it is exported to India. Nepal is the world's largest producer of large cardamom, with an annual production rate of 5,000 to 6,000 metric tonnes. The production of large cardamom has expanded to 41 out of the 77 districts.
Bhutan and India follow Nepal in the volume of production. Taplejung, Panchthar, Ilam, and Sankhuwasabha are the main production districts of Nepal, the report reads, adding that about 98 per cent of Nepal's production is exported and even though most actors expect the value chain to make attractive returns, it is heavily dependent on Indian traders. “Nepali traders have little role in price determination.”
Since 2015, the price of the product – which is dependent on global market fluctuations – has, however, seen a continuous decline. In Taplejung District, women home-based workers admitted that crop disease and lack of water resources have become sources of worry. Additionally, women home-based workers lack access to the market and feasible credit facilities.
National Planning Commission (NPC) member Dr Usha Jha, on the occasion, said that Nepal can provide a platform for the neighboring countries – Bhutan and India which are growing this highly valued spice – to enlarge the pie and seek new markets in South East Asia, while propagating this eastern Himalayan region as a spice corridor.
HomeNet South Asia (HNSA) – a network of home-based worker organisations in South Asia – led the study that shows that the cash crop enjoys a lucrative market, and the incomes generated from it have made immense contributions to improving the lives of women involved.
On the occasion, country manager of World Bank for Nepal Faris H Hadad Zervos said that putting in place a system of gender-disaggregated and gender-specific data collection, introducing women-friendly technology and tools for production and processing, and supporting women's institution building for skill enhancement and marketing will go a long way in ensuring effective and appropriate returns to investment in the cardamom industry.
The report was launched during a multi-stakeholder consultation on South Asia's large cardamom value chain development prospects hosted by the World Bank, with participation from government officials from Nepal, Bangladesh, and India. The consultation meeting focused on women's entrepreneurship in the large cardamom value chain in Nepal, India and Bhutan, and also explored such opportunities in Bangladesh.

Government prioritises trade to achieve sustainable growth

Nepal has requested development partners to prioritise their support in four key areas – product development, trade-related infrastructure development, trade facilitation and market promotion for the trade-led sustainable and inclusive economic growth – and also gender empowerment and poverty reduction.
Addressing a concluding ceremony of 16th Donor Group meeting on Aid for Trade (AfT) here today commerce secretary Naindra Prasad Upadhayay said that the government has prioritised trade as an important component to achieve inclusive and sustainable economic growth, gender empowerment and poverty reduction through various periodic plans, policies and strategies.
Thanking Germany for its vital role as Donor Facilitator for the last five years, Upadhayay welcomed the EU Delegation to Nepal as the Enhanced Integrated Framework (EIF) Donor Facilitator. He further stressed that the Commerce Ministry was looking forward to jointly work with the European Union (EU) and relevant stakeholders, including the private sector, for address the challenges in trade sector due to limited supply capacity and inadequate trade-related infrastructure.
The meeting reviewed the implementation of the Action Matrix of Nepal Trade Integration Strategy (NTIS) 2016, the Capacity Development Strategy (CDS) of Commerce Ministry and the formal handing over the role of Enhanced Integrated Framework (EIF) Nepal Donor Facilitator from the Embassy of Germany to the European Union (EU) Delegation to Nepal.
During the meeting, various development partners working in trade sector in Nepal expressed their firm commitments in supporting implementation of NTIS 2016 and for the overall trade sector development of Nepal.
Speaking on the occasion, the out-going EIF Nepal Donor Facilitator and deputy chief of mission of German Embassy in Kathmandu Jacqueline Groth, appreciated the efforts being taken by the government on the policy front by bringing out the Trade Policy, NTIS 2016 and CDS. She also highlighted the need for support from Nepal's development partners to the government for the implementation of trade policies and strategies. She underscored the importance of coordination among various line ministries and the private sector for mainstreaming trade in sectoral polices, plans and leveraging resources.
Similarly, the new EIF Nepal Donor Facilitator and head of cooperation of the EU Delegation to Nepal Andreas Roettger, expressed the pleasure of the delegation in assuming the new role. He said that the EU was one of the largest trading partners in the world and the EU sees trade and investment also as very important vehicles for inclusive development as outlined in its 'Trade for All' strategy.
The Aid for Trade (AfT) initiative was launched during the Sixth Ministerial Conference of the World Trade Organisation (WTO) held in Hong Kong in December 2005. The major focus of the AfT initiative has been to address the supply-side constraints facing developing countries in general and the least-developed countries in particular, especially development of economic infrastructure and building productive capacity.
Least Developed Countries (LDCs) like Nepal benefit from the most preferential trade regime globally available, and Nepal has the potential to embrace this opportunity stronger. In 2016, Nepal exported goods worth 90 million euros to the EU, making it Nepal's second largest export market after India. The EU's 'Everything But Arms' initiative allows duty and quota free access for all kind of products with the exception of weapons and ammunition.
The government's Trade Policy 2015 has prioritised supply-side capacity building, increase in production and productivity, trade in services, protection and promotion of intellectual property rights, trade mainstreaming, aid for trade, and corporate social responsibility as mechanism to boost trade in the country.
In close complementarily with the policy, the government has launched Nepal Trade Integration Strategy 2016 which seeks to address the outstanding trade and competitiveness challenges confronted by the country's export sector. NTIS 2016 focuses on actions to address constraints on the seven broadly grouped cross-cutting sectors and 12 priority export potential sectors by 2020. It includes nine products – cardamom, ginger, tea, medicinal and aromatic plants, fabrics and textiles, leather, footwear, Chyangara Pashmina and Knotted Carpets – and three services – IT and Business Process Outsourcing, Tourism – and Skilled and Semi-Skilled Professional Services.
The NTIS 2016 has identified 190 actions to be implemented by 2020 with clear roles and responsibilities along with quantitative indicators to measure its success. It has clearly outlined its focus on supply capacity through increased production and productivity, product and value chain development, development of trade-related infrastructure to address the bottlenecks of supply-side constraints and enhanced market access in terms of both technical and institutional capacity building.

Nepal asks US to promote bilateral trade

Nepal has requested the US to increase investment in promoting trade between the two countries.
During a meeting held at the Commerce Ministry today, commerce minister Romi Gauchan Thakali asked US Ambassador to Nepal Alaina B Teplitz to increase investment in promoting bilateral trade as strengthening trade and business relations would be beneficial to both countries and their people.
He also called on the US side to extend investment, along with transfer of technology, in Nepal so as to increase the production and productivity of those products which have high export potential in the US market.
With the promulgation of the constitution by the Constituent Assembly last year, Nepal has embarked on the path of economic revolution, he said, adding that Nepal requires support from its development partners, including the USA, to expedite its economic growth and prosperity.
As new constitution adopts a liberal economic policy as the state’s main directive principle for economic advancement, Thakali called on US investors and entrepreneurs to capitalise Nepal’s conducive economic environment as ensured by the constitution.
Recalling some of the recently enacted acts and regulations, such as the Labour Act, the Industrial Enterprises Act, the Special Economic Zone Act, the minister said the present government was very much determined to create an investment-friendly environment and protect the interest of investors under all circumstances.
He urged the US to enhance its investment in the tourism, hydropower and agro-processing sectors which had ample potential for producers and exporters wishing to invest in those sectors. Thakali also urged the US ambassador to enhance US support to the government in implementing some of the key projects as envisioned in the recently-launched Nepal Trade Integration Strategy (NTIS) 2016 and the Nepal Trade Policy 2015.
He also expressed hope that the US would continue its support to Nepal for its development and help Nepal achieve its goal of graduating from the LDCs status by 2022.
Recalling understandings made at the second TIFA Council meeting held in Washington, DC, in June, he extended an invitation to the US side to participate in the third TIFA Council meeting scheduled to take place in Kathmandu next year.
Teplitz, on the occasion, expressed hope that bilateral trade and investment relations between the two nations would be further enhanced during her tenure. Mentioning that the US-Nepal friendship was based on trust, goodwill and mutual cooperation, Teplitz said the bond of mutual ties between the two countries had tremendously grown over the years.
Welcoming Thakali’s statement at the BIMSTEC Business Summit held in New Delhi on October 14, Teplitz also noted that the BIMSTEC process would be helpful for Nepal to enhance its connectivity and trade to other members of the region.
“The US stands ready to support Nepal in its development efforts,” she said. Calling TIFA a milestone document, Teplitz said that she hoped it would bring tremendous opportunities for businessmen and entrepreneurs from both sides in the days to come.
The ambassador expressed some of her government’s concerns, including the establishing of a one-stop service – single window – for investors, clarity on area of investment to be made by foreign investors, and the possible amount of return that can be taken back by the investors, among others, to be well-reflected in the proposed legislation of Foreign Investment Act being prepared by Nepal.
She also assured Thakali that she would convey his message to American investors and entrepreneurs about increasing their investment in tourism, hydropower and agro-processing industries. She said her country’s interest in extending support in value chain in the agriculture and intellectual property, among others.  
Commerce secretary Naindra Prasad Upadhaya and other senior officials from the ministry, and the Economic and Commercial Officer at the US Embassy in Kathmandu Kevin C Price were also present at the meeting.

Government launches NTIS 2016 trimming exportable items' list

With an ambitious target to double the export of NTIS products to around 4 per cent of the gross domestic product (GDP) by 2020, the government has today launched the revised Nepal Trade Integration Strategy (NTIS), putting 12 sectors in priority.
It has trimmed the list of goods and services having high export potentials to 12 from 19 in the NTIS 2010 on the basis of comparative and competitive advantages.
According to the revised NTIS or NTIS-2016, the list now has nine products and three services. The new list has prioritised medicinal and aromatic plants, black cardamom, ginger and tea under agriculture produces, and leather products, footwear products, readymade garment, pashmina and hand-knotted carpet under industry category.
Likewise, remittance generating services, IT, BPO and IT Engineering, and tourism are the service products in the NTIS-2016.
Launching the NTIS-2016 today, commerce minister Romi Gaucahn Thakali said that the government was trying to reduce the cost of production of agriculture and industrial products.
However, traders and exporters have complained that the government initiative was simply insufficient to give a boost to exports. Chronic energy crisis and labuor problem are some of the constraints to export growth, they added.
The Ministry of Commerce had revised the NTIS-2010 as per the suggestions of the exporters after export of key products declined continuously despite getting high priority.
NTIS is one of the ambitious programmes that the government launched to promote products and services having high export potentials since last six years. However, export of most of the 19 NTIS products has been disappointing in recent years.
According to the Trade and Export Promotion Centre (TEPC), export of NTIS products increased by a mere 2.08 per cent to Rs 27.41 billion in the last fiscal year. Export of NTIS products is around two per cent of the GDP at present.
Meanwhile, the strategy has set immediate targets that need to be achieved by 2017 and medium-term targets by 2020.
It will also clarify which authority will look after specific products, the ministry officials said, adding that the revised NTIS envisions creating an enabling environment for trade by strengthening the supply capacity as well as institutional capacity development of trade-related institutions. "Capacity enhancement of trade-related institutions could be highly supportive in reducing cost of trade through initiation of various measures."
Commenting that the NTIS 2016 is ‘realistic’, National Planning Commission (NPC) member Dr Swarnim Wagle, on the occasion, said that the country’s export has been slowing due to supply-side incompetencies, deficiencies on the regulatory front, and less than optimum cooperation from the government since the beginning of the new century. Citing examples of some ‘high value to weight ratio’ products like Kobold watches, Sherpa Adventure gear, organic tea, software and creative apps and ophthalmic lenses developed by Tilganga Institute, he said that some Nepali products have been doning amazingly well in the international market by efficiently branding their products
Nepal as a young populous country should not skip manufacturing and rather focus on reviving the manufacturing sector, especially along the Tarai belt, Wagle said, highlighting the possibility of creating mass employment by linking up the Nepali industries with Indian production networks as well as regional and global value chain.
Stressing on the need of complementary reforms, he said that reform and industrial enterprise development, foreign direct investment, labour reforms, logistic industry development, our ambition in tourism all need to be taken simultaneously. "Horizontal reforms or high quality improvements in entire sectors at the same time could be almost impossible for a country like Nepal, which is when anchor investment could be the next best option and Nepal is also focusing on the second alternative, like the special economic zones, targeted investment approaches."
Enhanced Integrated Framework (EIF) – the aid for trade mechanism of World Trade Organisation (WTO) and various other development partners for productive capacity enhancement of least developed countries – has been providing support for NTIS implementation.

Trade deficit widens to Rs 289.62 billion

Trade deficit ballooned to Rs 289.62 billion in the first half of current fiscal year 2013-14.

The country imported goods worth Rs 334.83 billion, whereas exported only Rs 45.21 billion, according to the Trade and Export Promotion Centre (TEPC) figures.

Though, the overall trade volume stood at Rs 380.04 billion – that is an increment of 14.2 per cent compared to the same period a year ago – the exports increased by 17 per cent and imports grew 13.8 per cent, the TEPC data revealed.

Due to the government’s failure in boosting exports, it could neither arrest the ballooning trade deficit not boost internal production and exports.

The country imported gold worth Rs 12.51 billion in first six months, whereas as usual the highest import bill stood of petroleum products at Rs 61.62 billion.

Iron and steels (Rs 29.5 billion) stood followed the petroleum products, whereas automobile and spare parts (Rs 20.28 billion) stood third largest imports.

Likewise, the exports of lentils, ginger and silver jewellery dropped as lentils export slumped from Rs 2.01 billion to Rs 964.72 million, the data revealed, adding that the woollen garment exports has, however, increased by a whopping 40.3 per cent to Rs 3.63 billion, whereas readymade garment exports swelled by 50.4 per cent to Rs 2.72 billion.

India as always is the largest trading partner of Nepal both in terms of exports and imports as the country exported goods worth Rs 29.51 billion to India and imported Rs 221.89 billion.

Apart from India, US, Germany, China, UK and Bangladesh are the major export destinations of Nepali products.

The TEPC data also revealed dismal situation of exports under Nepal Trade Integration Strategy (NTIS) as the country exported NTIS products worth Rs 14.20 billion against Rs 14.68 billion in the six months of last fiscal year.

Double digit inflation, lower capital expenditure stare at new finance minister

Double digit inflation and lower capital expenditure will stare at the face of to be new finance minister.

The new government – under Nepali Congress president Sushil Koirala – that is going to be sworn in tomorrow will find it difficult to contain the inflation that stands at 10.3 per cent in the fifth month – of the current fiscal year – against the government's target of 7.5 per cent. Likewise, the former bureaucrat-government has also failed to expedite the capital expenditure that could have created employment in the rural areas and capital formation to contribute to the economic growth.

However, according to the latest data, around Rs 14 billion capital budget has only been spent, which is less than 15 per cent.

However, the economists opined that there is also stark need of redefining priority, bring structural change and look at the policies why they are not working.

"There is an urgent need of serious relook in the policy on why are they not working," said senior economist Prof Dr Bishwhambher Pyakuryal.

"None of the indicators look encouraging," he said, urging for an urgency in structural change in the economy. "Linking agriculture with market, boosting tourism competitiveness index, expanding the NTIS products and services, managing over flow of liquidity in the market and foreign aid are key."

The low consumption capacity of the private sector has swollen the banks and financial institutes vault that is not going to help expand economy, he added.

Likewise, private sector thinks that the increased public investment in infrastructure will help propel economy and create employment for youth, who are forced to go abroad searching for jobs. "The government must regain confidence of the youth," said Federation of Nepalese Chambers of Commerce and Industry (FNCCI) president Suraj Vaidya.

If only the government walks the talk and implement election manifesto, the private sector will gain confidence, he said, adding that the solving energy crisis – that the Nepali Congress had claimed to solve in three years – and expediting the infrastructure projects could be good starter.

However, the real test of Koirala would be what types of ministers – for the key ministries like finance, industry, labour, tourism, and energy he chooses for his cabinet, he added.

In its election manifesto, the Nepali Congress had set an ambitious target of eight to 10 per cent economic growth within four years and pledges like ending load-shedding within three years and taking industrial growth rate to 12 per cent.

National Honey Expo begins

Agriculture Minister Tek Bahadur Thapa inaugurated the First National Honey Expo 2070 here today.
Organised by Nepal Central Honey Entrepreneurs’ Association in association with Directorate of Commercial Pest Development, the four-day exhibition aims at disseminating information on Nepali honey to promote the product that has huge potential.

Though, Nepal has a capacity to produce 10,000 tonnes of honey every year from one million beehives, the honey has not been able to see its export due to certification hurdles and quality assurance.

The minister, on the occasion, promised to promote honey in coordination with the private sector.
The expo has some 33 stalls showcasing a wide variety of local honey – one of the key export potential product under Trade Integration Strategy (NTIS) 2010 – that has not been exploited.
Nepal exported honey worth Rs 1.89 million in fiscal year 2011-12 but there was negligible export in the last fiscal year, according to the Trade and Export Promotion Centre (TEPC) statistics.
Amid declining export of honey, the expo aims at creating awareness to promote commercialisation of the sector, president of the association Dharma Raj Shrestha claimed.

The government is planning to spend eight million euros – that the European Union has pledged for NTIS products – to promote honey, informed joint-secretary at Ministry of Commerce and Supplies Toya Narayan Gyawali.

Nepal produces variety of honey – from flowers of mustard, millet, chiuri, rudilo, jamun or the herbals found in the wild – that also has medicinal value.

Tea producers seek government support to boost export

Tea producers today warned the government that they will be forced to stop operations due to rising production cost and irregular supply of power that have made quality tea production difficult.

“If the government does not address the rising production costs and power shortages, we will be forced to stop the operations,” said tea producers at a programme here today.

The Nepali tea will not be able to compete with the Indian and other countries’ tea due to rising cost of production, they said, adding that they were unable to compete in the market as other countries have been providing subsidy to their farmers.

The tea producers also expressed their dissatisfaction for not addressing their demands in the budget for the current fiscal year 2013-14. “We have submitted an eight-point demand to boost the sector but the government did not address it,” they complained, asking the government to provide a four per cent subsidy on Nepali tea that would help Nepali tea competitive in the international market.

The cash incentives programme is also cumbersome, they said, asking the government to simplify it as tea is a 100 per cent value added export product.

The government should help us get fertilizer easily, they demanded, asking for grants in purchasing fertilizers.

Likewise, they also asked separate feeder for the tea producers to maintain the quality of tea and minimise the operation cost that has been surging due to regular power outage.

“Regular disruption in power supply has affected the quality,” said Chhatra Giri of the Tea Producers’ Association.

Since there is a huge demand of organic tea in the international market, the country has not been able to exploit the market. “Only four out of the 25 orthodox tea producing farms have received organic certification,” according to the Himalayan Orthodox Tea Producers’ Association (HOTPA) that is helping the small holder tea producers to maintain quality tea production.

Similarly, lack of internationally accredited tea testing lab has also hurt the organic tea export,” said HOTPA president Udaya Chapagain, on the occasion.

Nepal produced some four million kg of orthodox tea last year and 90 per cent of the production was exported to India, according to the data of HOTPA that also informed that the country has a capacity of producing 100 million kg of tea annually, it currently produces some 20 million kg of tea from 51 processing plants. “Of the total production, some 60 per cent is exported — some 58 per cent to India and only two per cent to other countries.”

Committed to support the tea producers as they help fuel exports, the government has also formed a committee to study the tea producers’ demands.

“A tea testing lab is under construction in the eastern Nepal, where there are more tea estates,” informed agriculture secretary Jay Mukunda Khanal, on the occasion.

However, the tea producers criticised National Tea and Coffee Development Board for its failure in registering the collective trademark of Nepali tea that is expected to help export Nepali tea under one brand assuring the quality.

The government has also allocated the budget for the trademark registration.