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PRABHAKAR GHIMIRE
As the coordinator of the Consultative Group of the Least Developed Countries (LDCs) at the World Trade Organization (WTO), Nepal has the opportunity to raise its voice to demand a larger space in international trade for LDCs. Also, with the country itself facing barriers aplenty in international trade and a skyrocketing trade deficit, Nepal can take the opportunity to take the stage to draw global attention toward its specific concerns on existing multi-lateral and bilateral trade issues. Though Nepal is suffering from ‘discriminatory attitudes’ shown by developed countries, mainly the United States (US), regarding granting of Duty-Free-Quota-Free (DFQF) facility in comparison to LDCs in Africa, Nepal will face challenges in trying to find a common ground that will be beneficial to and accepted by all LDCs. “Some LDCs are enjoying DFQF to market access while others, including Nepal, are deprived of this facility. Given the fact, as a chair of LDCs in WTO, Nepal has to explore the landing zone for convergences of crucial issues,” said Shankar Bairagi, the Permanent Representative for Nepal´s mission at the WTO Secretariat in Geneva, Switzerland. However, growing competition among LDCs to benefit from global trade at individual levels will hamper the process of finding a common agenda that can be raised collectively at the international forum. Though developed countries have pledged DFQF market access to 97 percent of the goods originating from LDCs as per Hong Kong Ministerial Conference in 2005, only around 80- 91 percent of the goods are enjoying such facility. Nepal has been getting 81 percent and some other African LDCs have been enjoying a preferential market for 91 percent of their total exports to developed countries under the DFQF. “As a group coordinator, Nepal is insisting on implementing market access in developed countries to 97 percent of the goods originating from LDCs so as to boost exports for LDCs,” said Toya Narayan Gyawali, joint-secretary at the Ministry of Commerce and Supplies (MoCS). Another crucial issue being raised by LDCs in different forums of WTO negotiations is Rule of Origin (RoO). Different developed countries, which have been importing goods from poor countries, have been setting their own standards and criteria to apply RoO to facilitate DFQF access to their markets. “In the absence of uniformity and harmonization in application for RoO for products being imported from LDCs by developed countries, we have to suggest the need for ‘best practices’ which can be most beneficial for our LDCs,” Bairagi said, speaking at an interaction on ´Nepal´s Participation at the 9th WTO Ministerial Conference´, held on Thursday. Gyawali also said country-specific RoO based on disparate formulae and requirements have discouraged LDCs from trying to enjoy the preferential market access that they might qualify for. “So, the LDC group has drafted a new RoO with a view to harmonizing and simplifying existing major RoOs that have been applied by different developed countries or regions,” Gyawali said. Another crucial issue that Nepal has been raising at WTO forums and is planning to raise in Bali is the implementation of Service Waiver that provides preferential treatment to LDCs on trade of services to developed nations. Commerce ministers at the 8th WTO Ministerial Conference held in Geneva on December 2011 had adopted a waiver to provide preferential treatment to services and services suppliers of LDC members. Given the fact that the services sector contributes over 50 percent of the total Rs 1,700-billion Gross Domestic Product (GDP) of Nepal, Nepali officials are also pushing for greater access to developed countries´ market for Nepal’s services sector. Keeping in view the significance of the services sector, Nepal Trade and Integration Strategy (NTIS) 2010 -- the government´s strategic roadmap to promote exports, has given priority to development of seven services sectors --tourism, labor, IT and business process outsourcing, health, education, engineering, and hydropower. However, export of the services listed under NTIS is still negligible. “Nepal can benefit from services trade if the decision of Service Waiver is sincerely implemented. For this, Nepal needs to explore measures to enhance its capacity to boost services exports,” said Gyawali. Nepal has been suffering a trade deficit of at least Rs 1.43 billion per day due to constraints in supplies of goods and services in the international market. Trade facilitation for LDCs, including Nepal, is also a long-pending issue which has not been properly implemented to enhance their [LDCs] international trade capacity. Negotiations on Trade Facilitation, initiated in 2004, have been aimed at enhancing technical assistance and capacity building, and simplification of customs procedures for LDCs. Though Nepal is entitled to a substantial amount in WTO’s Aid for Trade scheme to enhance its capacity for promotion of international trade, the support has not been properly channelized to effectively serve its purpose. Pushpa Sharma, research director of South Asia Watch on Trade, Economics and Environment (SAWTEE), also said LDCs are entitled to get preferential treatment for services with respect to the number of services allowed for supplier, value of transaction or assets, and quantity of services, among others. Nepal needs to secure more support under Aid for Trade to improve its supply capacity. Even though Nepal has a huge potential when it comes to export of the services identified by NTIS, actual export of such services remains negligible. Given the huge contribution of services to GDP, nominal share of services in total export highlights Nepal’s poor capacity to take advantage of services exports. As a leader of LDCs in WTO, Nepal can use the stage of the ministerial conference to seek new preferential treatment to boost services trade. | ||||||||||||||||||||||||||||||||||||||
Though Nepal acceded to the WTO on 23 April 2004, Nepal has been suffering widening trade deficit every passing year. Average trade deficit of Nepal stands at Rs 1.43 billion per day.
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Friday, November 29, 2013
WTO Ministerial Meeting, Host of challenges ahead for Nepal
Tuesday, November 26, 2013
Nepal-India ICG meeting in December
PRABHAKAR GHIMIRE
Nepal´s trade talks with its largest trade partner has been pending since December 2011, when the last Inter-governmental Committee (IGC) -- commerce secretary level -- meeting was held in New Delhi, due to political instability and weak diplomatic efforts by its officials. The next IGC meeting is set to be held in Kathmandu from December 21 to 23.As per the understanding between Nepal and India, both sides have to sit for trade negotiations at least once in every six months in alternative locations. “We have sped up preparation as the Indian officials have expressed willingness to sit in the negotiations,” an official at the Ministry of Foreign Affairs said. Due to prolonged political stability, Nepali officials faced difficulty in convincing the Indian officials to sit in the meeting. According to officials, the meeting will be focused on taking necessary measures to resolve problems in bilateral trade. “In the meeting, we will thoroughly study the implementation aspect of past agreements between besides making attempts to take new measures to facilitate bilateral trade,” the official said. At the meeting, Nepal will propose India to make amendment to the existing transit treaty to facilitate exports of third country goods to overseas markets via Indian ports and transport of vehicles imported from third countries through containers. Existing transit treaty allows imports of vehicles via India territory only by driving. Indian customs officials have been frequently restricting export of goods originating in third countries via its customs points referring to the transit treaty. This is affecting return of goods which are imported for temporary purpose such as trade fairs and for different projects. “ “We are also requesting India to open up additional trade routes to facilitate our international trade,” the official added. Nepali officials are also requesting India to allow transportation of third county imports in bulk through open wagons. Currently, only hooded containers are permitted to supply overseas imports to Nepal via India ports. In a bid to address the long-running complaints of Nepali traders on hassles in Kolkata ports while clearance goods, Nepali officials are also seeking procedural simplification in Nepal´s third-country trade. During the talks, Nepali side will also seek settlement of outstanding dues to be received by Nepal government from Indian authorities under Duty Refund Procedure (DRP). Though India agreed to scrap the DRP in 2011 in line with the Nepal-India Trade Treaty signed in 2009, Nepal has yet to recover outstanding DRP dues. Nepali traders had long been opposing the provision of DRP stating that it is a time-consuming process of claiming back the amount that Indian government charges on imports from India as central excise duty. Under the DRP system, the amount paid by Nepali importers as central excise duty to the Indian government used to be deducted from the import duty that they were required to pay to the Nepal government. The Nepal government later used to claim the deducted amount from India. Similarly, abolition of 12 percent Countervailing Duty (CVD) on Nepal goods including readymade garments (RMG), mutual recognition of quality certification for exportable products issued by authorized agencies of both the governments, and abolition of Agriculture Reforms Fee (ARF) being levied by Nepal are also among the major agendas of the meeting. Indian officials are also seeking removal of non-tariff barriers from Nepal government for Indian ayurvedic and pharmaceutical products and reduction of customs duty on imports of cement and clinker from India. The meeting is also expected to review the restriction on circulation of Indian bank notes of Rs 1,000 and Rs 500 denomination in Nepal and dispute resolution measures to settle outstanding dues to be recovered from companies of both the countries by their respective governments. Improving trade facilities in border points, automatic renewal of existing bilateral Railway Service Agreement (RSA), operation of additional customs points along the border, and restoration of Margin of Preference -- a gap between customs duty for overseas imports and Indian goods - are the other issues being raised by Nepal in the meeting. Nepal is also requesting Indian officials to allow imports of cows of improved breeds from India. The southern neighbor, which has been facing deficit of fresh milk and meat, doesn´t allow its traders to export livestock. |
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Stable government necessary for better economic performance
| Naoyuki Shinohara, the deputy managing director of the International Monetary Fund (IMF), is in Nepal to participate in the 49th South East Asian Central Banks (SEACEN) Governors� Conference and the 33rd meeting of the SEACEN Board of Governors, being hosted by Nepal Rastra Bank (NRB) in Kathmandu. At a time when Nepal is facing double-digit inflation and the weakening of the Nepali currency against the US dollar, Shinohara spoke to Prabhakar Ghimire of Republica on Thursday about the current economic challenges facing the country. | 
| Excerpts: Nepal�s economy has been passing through an average of 4 percent economic growth for the last few years. How can Nepal accelerate growth at this point in time? Our projection for economic growth in Nepal for this year is 4.5 percent. Still, it is lower compared to Nepal�s economic potential. It is important for any country to be equipped with infrastructure such as roads, and a favorable business climate for encouraging the private investment. More public spending is also crucial for greater economic growth. Nepal has a huge potential for hydropower development. If you develop road networks, you can expand the market access for local products. Strengthening the road network linking Nepal to neighboring India and China will also help boost Nepal�s economic activities. Infrastructures such as transport development and creation of business climate with a stable government and resolution of labor issues will be of great support for higher growth. For the last few years, Nepal has been experiencing double-digit inflation. How can Nepal bring down inflation, given the peg system of the Nepali rupee with the Indian currency when two-thirds of Nepal�s total trade is with India? The central bank can tighten monetary policy and strengthen vigilance of the market to bring down inflation. However, given the depreciation of the Nepali currency against the dollar by over 20 percent over the last few months in line with the Indian currency, with which Nepali rupees is pegged, controlling inflation is challenging. But, you can benefit from the weakening Nepali rupee because of the increased value of remittances. You can also benefit from the stronger dollar by enhancing the supply side for more export. Do you see this time as appropriate for shifting from the existing pegging with the Indian rupee to determination of the value of currency from a floating rate system? Nepal�s trade with India is more than 60 percent of its total foreign trade. It is natural to maintain a stable exchange rate with the Indian currency. Maintaining the peg of the Nepali rupee with the Indian rupee is appropriate for the time being, given the economic performance of Nepal. Nepal does not need to shift from the pegging with the Indian rupee unless economic competitiveness is increased through diversified industrial sectors and exports. IMF and the World Bank (WB) are undertaking an assessment of the financial sector of Nepal. Could you update us on the progress so far? What would be the next steps after the assessment? The ongoing financial sector assessment program will help the Nepali authorities strengthen and stabilize the financial system in Nepal. IMF will work together with Nepali officials and provide the necessary financial assistance to Nepal for the stability of financial sector in the coming days as well. Remittance inflows to Nepal have increased significantly over the last few years. But the huge amount of remittance has not been utilized in the productive sectors to support economic growth in the country. What would be your suggestions for Nepal to take maximum benefit of the earning from our overseas workers? It is very difficult to properly channelize remittance as it comes into individual or family levels. As people are not finding jobs in the country and going abroad to earn money, they use a large chunk of the remittance for consumption. But in the absence of alternative sources of income among remittance receiving families, we can�t stop the trend. As remittance contributes as much as 25 percent of Gross Domestic Product, you have a huge potential to use remittance for the productive sector to generate new employment in the country. Nepal has to create a business-friendly environment and remove infrastructure bottlenecks to create the situation for generating employment for the growing number of unemployed youth job-seekers. And Nepal has also to create a favorable economic and political situation to encourage more investment of remittance in productive sectors. As you know, Nepal is located between two Asian giants India and China. How can Nepal benefit from the strategic location for greater economic prosperity? Nepal can benefit from both these huge neighboring countries which are also large markets for Nepali products. Nepal should start boosting production of farm goods which have huge competitive advantages for the country in the region. Tourism will also been another potential sector for Nepal by luring tourists from these emerging Asian economies. Nepal can take huge benefit from hydropower development by bringing in investment from China and India. Exporting surplus electricity to power-hungry India will help bring down Nepal�s trade deficit. Besides, Nepal can become transit points between India and China by developing the necessary transportation infrastructure. Is IMF planning to establish its resident mission, given its increasing support for Nepal, especially in financial sector development? It is true that we don�t have a resident mission in Nepal. It doesn�t mean that our support to Nepal is little. We have been giving priority to Nepal for its financial sector development. Though we have not been able to set up our permanent mission due to our financial difficulty, our resident representative based in our New Delhi offices have been frequently visiting Nepal to oversee the financial situation of the country. We have also a technical assistance advisor in Nepal to look after support programs. Our central bank --Nepal Rastra Bank (NRB) -- has stopped granting licenses for new commercial banks. Is it the right move? It is necessary for the central bank to have the ability to maintain financial sector stability, which is crucial for economic growth. The central bank is heading in the right direction by stopping new licenses for commercial banks. We welcome the measures taken by NRB. The central bank might have taken this step to ensure proper monitoring of the financial sector. We have also been supporting the central bank strengthen its power to effectively regulate the financial sector. Not only does the number of financial institutions need to be regulated, we need to develop the legal and supervisory framework for an effective financial sector. How do you assess the ongoing political situation after the successful elections of the Constituent Assembly? We are not in a position to comment on the political development of Nepal at this point. I can only say that more political stability is needed to pave the way for higher economic growth with better economic activitie | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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