News Analysis: Nepal repeatedly struggling to boost exports amid domestic, policy issues

KATHMANDU, Aug. 27 (Xinhua) — Seven years ago when Nepal implemented its 12th Periodic Plan, the Himalayan country announced a target of boosting its exports to 1 billion U.S. dollars by the end of the three-year plan in 2013.

However, Nepal failed to meet its export target with exports reaching just 748 million U.S. dollars in the final year of the 12th plan, according to Nepal’s central bank data.

The Nepali government, following this, set the same target of 1 billion U.S. dollars for the 13th plan ending 2016.

Instead of a rise in exports, however, Nepal saw a downturn to 681 million U.S. dollars in the final year of the 13th periodic plan.

With the first year of the 14th plan concluding in mid-July this year, Nepal’s exports increased slightly to 710 million U.S. dollars, according to the central bank. Nepal imported goods worth 9.6 billion U.S. dollars in the last fiscal year, the share of exports in total trade stands at just 7 percent.

The Nepali government officials and trade experts have said Nepal’s small export basket, lack of production and productivity growth due to the rising outmigration of its youth population, poor transport and other infrastructure necessary to deliver goods in time internationally, are factors contributing to the failures of the plans to boost exports.

“We are not in position to boost exports even if we receive orders for large quantities of goods because we are lacking in large industries capable of fulfilling the demands,” Rabi Shankar Sainju, joint secretary of Nepal’s Commerce Ministry, told Xinhua recently, adding, “We have also failed to diversify our products as per the demands of the international market.”

By comparison, the United States last year granted duty free access for 66 types of Nepali garment and carpet products for 10 years, but most of them are not familiar to mainstream garment manufacturers here.

“Our garment manufacturers have not shown an ability to diversify their goods as per the U.S. market yet,” said Sainju. Readymade garments are one of the key export products of Nepal.

China has also been providing duty free access to Nepal for more than 8,000 goods but Nepali exporters have been unable to tap into these opportunities.

Nepali exporters say that they have to face various challenges, particularly related to quality standards in international markets.

Nepal’s largest export market is India and most of the goods are primary agricultural products. However, exporters say it is not easy to export agricultural goods due to quality related concerns.

According to experts, large scale outmigration by Nepal’s young population has also detrimentally affected industries and hit the export sector particularly hard.

“Until a few years ago, Nepali export industries were facing a militant labor force that held frequent strikes. More recently, labor relations have improved. But there is a labor shortage which has impacted the nation’s ability to produce enough goods to meet demands,” Purusottam Ojha, a trade expert, told Xinhua.

Ojha, who is also the former commerce secretary of the Nepali government, said the government has focused on promoting foreign employment which has increased the vulnerability of Nepal’s economy.

“Nepal’s economy may be vulnerable to incidents such as the diplomatic stand-off between Qatar and Saudi Arabia-led Gulf nations from where a large chunk of remittance comes into Nepal,” said Ojha.

Experts also say there is a need for the right mix of exports and remittance for the improving health of Nepal’s economy.

Nepal has taken some policy initiatives in this direction, such as providing export incentives to exporters and providing many inducements industries to be established inside Special Economic Zones (SEZs) through the SEZ Act and Industrial Enterprises Act.

The country has also made arrangements to provide loans at cheaper rates.

“But the policies are not being implemented properly,” said Sainju.

 

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