The Ministry of Commerce recently prepared an export strategy of four sub-sectors that include coffee, tea, large cardamom and handmade paper, which have huge potential to boost exports with high value addition. The export strategy was prepared with support of the International Trade Centre, which has also been working to promote Nepali pashmina in the global market. ITC has suggested that the government and producers move up the value chain to capitalise on the market potential of Nepali products that have niche market advantages. Pushpa Raj Acharya of The Himalayan Times caught up with Arancha González, executive director of International Trade Centre, who was here in the country last week to launch the export strategy of the four aforementioned products, to talk on how Nepal could capitalise on the market access provided by various developed countries. Excerpts:

The alarming trade deficit that is being witnessed is one of the major challenges for the country’s economy. How can the country cope with this problem?

First, we have to look at the composition of the trade deficit and understand which part is solvable in the short term, medium term and long term. For example, deficit caused by the rising import of petroleum products could be minimised through construction of hydropower projects. When I look at Nepal’s trade deficit, the biggest challenge I see is not in imports but in exports. And the major challenge in exports is not due to lack of market opportunity abroad because Nepal has been enjoying ‘duty free, quota free’ market access in the European Union, United States of America, China and India, among other countries. The problem is how to realise the opportunity being provided by these countries. The main problem of the country’s export sector lies in the supply side. This is why the International Trade Centre (ITC) is working on the supply side and helping Nepal to resolve this issue in the medium term.

You have mentioned that ITC is supporting Nepal to address the supply side constraints, but if we look at the Nepal Trade Integration Strategy, it has included products that cannot contribute significantly to reduce the trade deficit even if export of these products increases by 20 times?

Nepal has to have multiple gains. The country needs to focus on multiple products of multiple sectors and eye multiple markets. It should not put all the eggs in one basket. Some products that Nepal exports today like tea, coffee, cardamom, carpets, handmade paper, textiles and footwear, among others, are products that Nepal has been producing and exporting since long. Now the country needs to focus on exporting more value added products. The country can get more revenue through value addition in products that it exports, which can help reduce the ballooning trade deficit. This has to be started sooner rather than later because the production and market are already there and what we have to do is to move up the value chain. To move up the value chain for products like coffee, tea and cardamom means it is about improving the processing methods of the products and branding such products. When you talk about Nepal, people from other countries visualise the Himalayas, organic, pure and fresh but Nepal is not capitalising on this ‘brand’ because these products which are being exported from Nepal do not bear the Nepali brand.

How can ITC help Nepal in branding and promoting Nepali products that have niche market advantage like how it is working on branding Nepali pashmina in the global market?

We first started working with producers of pashmina and they realised that they needed a brand to sell their products in the global market and we helped them to develop the brand and register the brand in major markets of Nepali pashmina and in potential market destinations. We even developed a design and a hologram for Chyangra Pashmina. If you are talking about Nepali brands in the global market then your products must be of superior quality. Brand Nepal must be associated with quality and then you must have big marketing companies. For this, everywhere that the government officials, traders or private sector representatives go, and in every event that Nepal hosts, the country must display its products for marketing.  There are many products that Nepal is not exporting today. For example, Nepal is not taking advantage in the area of service or trade that takes place digitally today. Twelve per cent of the international trade is conducted through the e-commerce platform and it is worth $25 trillion annually. E-commerce provides a platform to connect businesses to consumers and it is expanding very fast globally. The best aspect is it requires no middlemen, so businesses can earn the entire value of their products for themselves. Electronic commerce is the sector where Nepal should invest in as there are some issues with payment system. Nepal is not connected to the international payment system. Nepali businesses cannot sell online. This is an important area, which needs to be resolved. Otherwise, Nepal will be excluded from this growing part of international trade. As a whole, what you are exporting today, you have to export more with greater value addition. What you do not export today like services you must start exporting. Some areas could be IT services, e-commerce services, business process outsourcing services and the country must use electronic commerce. Through use of electronic commerce you can create many jobs. For a business to go on the electronic platform, it needs to have an  online catalogue that creates jobs, it needs good packaging and labelling that further create jobs. Lastly, the branding that is needed for these products creates more jobs.

Do you mean that Nepal cannot be competitive in production of goods and that’s why it needs to focus on service trade?

Nepal can be competitive in both goods and services trade. Nepal is costlier because of its geographic location. Nepal cannot play the game of big volume in the international market. Smaller volume but of higher value is good for goods and services trade for Nepal. Distance and landlocked status or a small market do not matter to increase the export of services. The only thing that matters is innovation by Nepalis and Nepal has to play on its competitive advantages.

You have said that productive capacity constraints are the major hassles for the country’s export sector. How can they be addressed?

We have mapped four value chains that include tea, coffee, handmade paper and cardamom, which have been selected after intensive dialogue with government officials and producers. These four sectors have high potential to be good export items of higher value. There is one common ingredient taken from each sector during the discussions and it is the quality of the products and quality infrastructure, certification of the quality, and strengthening the laboratories that test the products, which can issue the certification that these products are as per the international standard. Nepal has big potential to move from agriculture to agro processing but this requires investment in quality infrastructure that is something that we see across the board to address the supply side constraints to some extent. One investment in quality infrastructure could benefit many sectors, to come out from the current challenges that the country’s export sector is facing.

What would you like to suggest to small and medium enterprises so as to integrate them in the value chain of large industries to reap benefits because over 90 per cent of the businesses in Nepal are SMEs?

Nepal is not the only country where there are a large number of SMEs. Even in the United States more than 90 per cent of the businesses are SMEs and the situation is similar in China and other countries as well. SMEs are a prevailing ecosystem in any country. The major factor of SMEs is that they can be an advantage for participating in the value chain. SMEs can be faster, more innovative and adopt new technologies and connect faster to the global market. I do not see any disadvantages in being an SME. What I see is the need to look at your comparative advantages and exploit them. For example, there is a gap in some sectors like payment system, digitalisation and installing technologies in SMEs and it is very important to work on these gaps. Nepali SMEs do not necessarily need to be integrated with the large industries of the country or the neighbouring countries. The most important aspect is that they should move up the value chain.