‘Major setback to country’s exports is low production’

Despite the government’s commitment to promote exports, there has not been any substantial progress in the country’s export sector. Statistics of Nepal Rastra Bank show that the country’s trade deficit has widened by 47.6 per cent to Rs 580.3 billion in the first eight months of the current fiscal year. Moreover, export of products listed under the Nepal Trade Integration Strategy, 2016, that focuses on boosting exports of niche products, is also not satisfactory. Sujan Dhungana of The Himalayan Times spoke to Minister for Commerce Romi Gauchan Thakali on the setbacks in the country’s trade regime, opportunities and government’s plan to boost trade. Excerpts:

Why is Nepal’s trade deficit constantly widening despite the government’s efforts to boost exports?

The major setback to Nepal’s trade is low level of production in the country. We have not been able to produce goods as per the demand in the local and international markets. Today, a number of Nepali products have high demand in the international market. However, we have not been able to increase our production capacity accordingly. This is probably because of lack of human resources as millions of Nepalis are travelling abroad for employment. In such a context, we need to promote different potential sectors like agriculture, energy and tourism. We have not been able to utilise the natural and human resources that we have. As Ministry of Commerce (MoC) is responsible to look after the country’s trade and production of goods, all other line ministries should coordinate with us to develop an integrated policy framework and programmes to increase country’s production and boost exports. Currently, we have poor inter-ministerial and inter-agency coordination and network. We have been importing petroleum products worth billions and demand is ever-increasing. Increasing import of petroleum products is also a major reason behind the widening trade deficit of Nepal. However, we have a huge opportunity in energy sector and if we are able to exploit it, fuel import will drop significantly thereby helping to narrow down the trade deficit. Thus, an integrated approach to promote exports, is the only way to achieve trade balance. If we fail to adopt an integrated approach to boost trade, Nepal’s trade deficit will further widen in coming days. We also need to adopt different measures that countries like Bangladesh, China and India have used to boost their industries.

Government adopted NTIS a few years back to boost export of niche products. However, NTIS exports have been falling over the months. Why is it so?

As we could not export NTIS products as per our target in the previous years, we revised the NTIS in 2016 and we are in the primary stage of implementing the revised NTIS. We revised the Trade Policy in 2015 making it friendlier to trade and export. However, it is a fact that we still have not been able to sell our brand in the international market. Products like carpets and pashmina lack branding in the global market despite being of a comparatively higher quality than any other foreign brands. Similar is the case with Nepali honey and herbal products. That is why, we are preparing to diversify the role of Trade and Export Promotion Centre (TEPC) of the government. Making TEPC more responsible to brand Nepali products and carry extensive research on potentials and setbacks of Nepal’s trade, MoC is in the final stage of transforming TEPC into Trade Promotion Institute (TPI). As credibility of the institution is crucial to promote goods in foreign markets, we are preparing to make TEPC more vibrant. The government is also committed to brand Nepali products first in the domestic market itself and then in the regional and the global markets subsequently.

Traders have highlighted the lack of adequate export subsidy as the major factor affecting competitiveness of Nepali products. Does the government have any plan to increase export subsidy?

It is not that the government is not giving export subsidy and other incentives to traders. However, it is true that our incentives to traders is comparatively minimal compared to other big economies of the world. The government does not have a problem in increasing incentives for traders. However, it has to be analysed whether domestic traders will actually work to increase export of goods after getting more incentives. There could be cases where some traders will only enjoy the government subsidy but do nothing substantial to enhance quality and production level of goods. However, we have recently written to Ministry of Finance to increase export subsidy on a few products. But, MoC will see whether or not traders have tried to enhance exports after the government increases export incentives.

Experts say that Nepal has not been able to diversify trade as a majority of Nepal’s trade is based with India. What is your take on this?

It is true that a majority of our trade is conducted with India. However, the objective of introducing NTIS is to diversify our trade globally. After the United States of America announced duty free facility for 66 export products of Nepal last year, we are focusing on increasing export of carpets and readymade garments to the US. Similarly, we are also focusing on extending connectivity to different global markets including India, China and Bangladesh. We are working closely with the Chinese government to start full-fledged operations of the Tatopani customs office. Similarly, we are also developing sound infrastructure inside the country to ensure easy transportation of goods. Nepali products are unique in the world as they reflect Nepali craftsmanship. But we have not been able to convince global buyers.

Unofficial trade with India has been rising affecting domestic economy. How have you planned to address this?

The issue of Nepal’s unauthorised trade with India has been raised time and again in bilateral meetings between Nepal and India and authorities of both countries are studying on possible solutions to it. But the fact is we share an open border with India and it is difficult to stop it completely. But such unauthorised trade can be minimised with effective customs services and trade mechanism. With both India and China preparing to implement some effective mechanisms to reduce informal trade between the two countries, we are optimistic that Nepal’s informal trade with India will reduce significantly in the coming days.

Construction of Integrated Check Post in both Nepal and India was part of enhancing trade relationship. However, construction of ICP in Nepal is still incomplete. What is delaying process?

ICP construction is the responsibility of both Indian and Nepali governments and Nepal cannot be blamed solely for the delay in construction of ICP in Nepal’s side. Talking about construction of ICP in Biratnagar, we faced a problem due to major transmission line in the ICP construction site. Due to lack of inter-ministerial coordination and existing policies of the government, ICP construction in Biratnagar was delayed. Regarding ICP in Birgunj, we are almost in the last stage of construction and it will be completed within a few months.

Nepal and China last year inked the much-hyped transit trade treaty. However, the protocol of the pact has not been signed. Why is it so?

Singing protocol of the treaty is not an overnight process. While signing protocol we should be very sensitive on the impacts and implications of the protocol. We have been sharing letters and documents of the protocol with China time and again. Similarly, we are also discussing with stakeholders on the provisions to be incorporated in the protocol. We are expecting the protocol agreement to be signed with China soon.