Nepal | August 07, 2020

Uncertainty is the only certainty

Rajan Sharma
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Cargo handling at Chinese ports fell 20 per cent on average in February, with the biggest ports witnessing a 50 per cent drop in cargo volume. Cargo volume at Chinese ports slumped following a sharp decline in manufacturing activities, thanks to the COVID-19 pandemic.

Manufacturing activities are captured by Purchasing Managers Index (PMI) across the globe. IHS Markit’s PMI for China dropped to 40.3 in February from 51.1 in January. This is the sharpest deterioration since the survey started almost 16 years ago, said IHS Markit, a London-based global information provider.

These developments do not bode well for the entire world, as almost every country is now dependent on the world’s second largest economy for the supply of raw materials, intermediate goods and final products.

COVID-19 has severely affected trade and disrupted supply chains worldwide. Nepal is likely to suffer immensely from these developments as well, as the government is yet to chart out plans to facilitate movement of goods to and from the country. This is because of lack of proper consultation among the stakeholders and the government’s know-all attitude. If these issues are not addressed in time, both imports and exports will suffer.

Nepal is not an export-driven economy. Yet merchandise export is the second largest foreign currency earner for Nepal. There are now fears of COVID-19 dismantling this revenue source, as no measure has been taken to remove hurdles in cargo handling, both inside and outside the country. This is the same for imports. If imports of raw materials, and capital and consumer goods suffer, the entire supply chain will crumble down, hitting production as well as consumption. This will prevent the economy from recovering from bruises suffered during the COVID-19 crisis, pushing the country back into the low growth trap of around 4 per cent per annum as in the years prior to the fiscal year 2016-17.

This calls for formulation of plans to expeditiously transport cargo from transit ports and customs points. So, focus must be laid on certain things. First is information visibility. Information about the rate of transmission of the disease, caution that needs to be taken both inside and outside the country during freight movement, and the government’s role in the management of logistics services must be disseminated promptly.

Customs clearance work does not move ahead smoothly without proper coordination between courier companies, clearing agents, terminal operators, banks and remittance service providers, labourers, and operators of trucks and trailers. Absence of one of these components could bring the entire customs clearance work to a grinding halt. For example, keeping the customs points open during the lockdown will not be enough to facilitate trade, unless the clearing agents are given special passes to move around. If the movement of clearing agents is restricted, inland container depots (ICD) will continue to come under undue pressure, as trains will not cease to bring in over 400 containers a week, rendering warehouses awash with goods.

At present, there are over 3,700 containers of goods at the Birgunj ICD and more containers are left stranded at the integrated check post in Birgunj. These goods can be seamlessly transferred to factories, private warehouses and shops, if the government avoids lengthy paperwork and encourages the use of electronic documents among different agencies. Automation will also allow clearing agents to perform their tasks without interacting with human beings, which will expedite customs clearance work.

Similar measures should be taken to bring in cargoes that have arrived at transit ports like Kolkata. The government would do the country a huge favour if it is able to simplify the process of changing the mode of transport from sea to road. This can be done if the state-owned transit warehouse company is able to hold discussion with Indian government authorities.

All these works require proper coordination among all the stakeholders, especially government and private sectors in the country of origin of cargoes and transit destinations.

The United Nations Conference on Trade and Development (UNCTAD) has proposed 10-policy measures to cover maritime transport, customs operation, transit, transparency and legal issues, as well as use of technology to enhance paperless trade processes, during the pandemic. These policy recommendations are aimed at: ensuring uninterrupted shipping; keeping ports open; speeding up customs clearance; facilitating cross-border transport; ensuring the right of transit; safeguarding transparency and providing up-to-date information; promoting paperless systems; addressing early-on legal implications for commercial parties; protecting shippers and transport service providers alike; and prioritising technical assistance.

The UNCTAD has also developed a computerised system called the Automated System for Customs Data (ASYCUDA), which offers a range of options to facilitate trade. But so far the Department of Customs has not embraced these recommendations to facilitate trade and ease the way of doing business.

This, however, does not mean Nepal should adopt the UN’s policy prescriptions in their entirety as some of them may not be applicable here or may increase the financial burden. What also needs to be kept in mind is that these policy prescriptions need to go together with Nepal’s epidemic containment effort, which is complex and multidisciplinary in nature. So, there should be proper coordination between epidemiologists and logisticians.

Generally, there is a gap between policies and modelling approaches, therefore, standards and guidelines published by healthcare organisations must be followed when developing epidemic logistics mathematical models. But these models should be created by taking realistic assumptions into account.

Therefore, modules of managing procurements and distribution in the supply chain must be discussed with the stakeholders if the country is to ensure seamless movement of goods during and in the aftermath of the global pandemic.

Sharma is the former chairman of the transport committee of the FNCCI, former president of the Nepal Freight Forwarders Association and a logistic consultant

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