Nepal needs to focus on just a few areas with high export potential and invest capital and skills in them
Nepal has seen a surge in merchandise exports in the first eight months of this fiscal year, surpassing the total exports of 2020-21, but there is little to be thrilled about the attainment. According to the Department of Customs, Nepal's export trade increased by 82.90 per cent to Rs. 147.74 billion during the first eight months (mid-July 2021 to mid-March 2022) of the current fiscal year. However, just two commodities – soybean oil and palm oil – accounted for Rs 76.72 billion, or almost 52 per cent, of Nepal's total exports during the period. Sadly, all of the soybean and palm oil is imported, which then is further refined here for export to India. Thus, the exported soybean or palm oil has only marginal value addition, and it is only the businessmen who tend to profit from their export. Their export is not sustainable, and is largely dependent on the tariff exemptions on Nepali exports to India under the South Asian Free Trade Area Agreement.
Despite the surge in exports, in dollar terms, they make up just a little over a billion dollars. According to Nepal Foreign Trade Statistics, Nepal's total merchandise exports last fiscal year stood at Rs. 141.12, hailed as being record high then, which is about $1.2 billion, compared to almost $50 billion that Bangladesh exports annually. Nepal has only a handful of products to export, and given its weak manufacturing base, Nepal has become a country largely dependent on imports for even its basic consumer needs. The share of export in the total foreign trade is only 10.14 per cent while that of import is a whopping 89.86 per cent. The country's total trade deficit stood at Rs 1,456.48 billion in the first eight months of this fiscal, financed almost wholly by money remitted by the millions of workers toiling in the Gulf nations and Malaysia. Thus, there is a need to diversify our exports as well as destinations to keep our economy healthy and benefit a large population - our farmers and workers.
Alarmed at the growing trade deficit, Prime Minister Sher Bahadur Deuba the other day made a clarion call for reducing it by exploring potential areas for investment and cutting down on imports. If there is commitment and the will to develop, there is no reason why our economy cannot make a turnaround in a short period of time. Nepal needs to focus on just a few areas with high export potential and invest the needed capital and skills in them. Just recall the 1980s, when Nepal exported hand-woven woolen carpets – its one and only export – worth a whopping $650 million annually, providing work to tens of thousands of people, mostly women, and sustaining the Nepali economy. Numerous studies have already pointed out potential export products – coffee, being one of them. But why is the country stuck with an annual production of just 500 tons of coffee, even after decades of its introduction, when Laos produced 30,000 tons of the beans last year? As long as the parties in power continue to hobnob with businessmen on the lookout for quick profit without having to invest in cumbersome production processes, exports will continue to stagnate, making the country even more dependent on imports for all its needs.
Cooperate with MCAN
The Millennium Challenge Account Nepal (MCAN), which is the country office of the Millennium Challenge Corporation (MCC), has now issued a 35-day notice to the local people to vacate the land acquired by the MCAN for the construction of a sub-station in Nuwakot. The MCAN, which functions under the Ministry of Finance, has already provided compensation and assistance amounts to families to acquire land for this purpose. The MCAN has also asked the concerned families to help transfer the landownership papers in the name of MCAN so that it could erect fencing and build boundary walls around the land.
As per the deal reached with the MCC headquarters, the $500 million U.S. grant should be utilised within five years from the date of its ratification by Nepal's Federal Parliament on February 27. Now, it is the responsibility of the local administration to vacate the land acquired from those who are still occupying it. All the political parties, local elected officials and civil society members need to cooperate with the MCAN for the timely construction of the sub-station and transmission lines, which will help ensure reliable supply of electricity produced from various hydropower plants across the country.
A version of this article appears in the print on March 24, 2022, of The Himalayan Times.