Private sector suggests for LDC deferral

Kathmandu, Nov. 28

The private sector leaders in Nepal suggested the government to explore avenues for the possible deferral to the country's graduation from the Least Developed Country (LDC) to a 'developing' status.

Speaking at a policy dialogue on 'Nepal's LDC graduation preparedness' organised by South Asia Watch on Trade, Economics and Environment (SAWTEE) in Kathmandu on Friday, they asserted that the exporters as well as small and medium enterprises and women entrepreneurs, would be significantly impacted if the country graduated as planned.

Nepal is aspiring to graduate in November 2026.

Although indicators show Nepal is on track for LDC graduation next year, private sector concerns over resilience after losing preferential treatment had prompted calls for a possible deferral.

SAWTEE said that the dialogue was organised to discuss the country’s current situation and its ability to address the additional challenges posed by recent domestic developments.

"Graduation would mark a symbolic leap forward, signalling global recognition of progress and potentially attracting more investments. Yet, it would also end LDC-specific support measures such as preferential market access for exports, concessional finance and exemption from patent protection for pharmaceutical products," it said.

Speaking at the dialogue, Minister of Industry, Commerce and Supplies. Anil Kumar Sinha highlighted the need to assess where Nepal currently stands, evaluate the progress made so far, and identify urgent measures needed to ensure a smooth transition, focusing on several key actions. 

Anjan Kumar Shrestha, Senior Vice President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said that while LDC graduation is a significant national achievement, it also brings major policy challenges. "Recent protests and slowing economic growth have left micro, small and medium-sized enterprises—already struggling to recover from COVID-19—under added pressure, with investor confidence remaining low," he said.

According to him, Nepal faces the loss of duty-free, quota-free market access and other international support, which will particularly affect garments, carpets, and pashmina. Persistent infrastructural bottlenecks further strain the economy.

Given this, Nepal urgently needs at least a three-year extension for LDC graduation, to be used to mitigate transition impacts. Instead of enduring prolonged uncertainty, the focus should be on building self-reliance and restoring national confidence through thorough preparation, he added.

Birendra Raj Pandey, President, Confederation of Nepalese Industries (CNI), stated that Nepal’s LDC graduation is a national aspiration, but preparation is crucial. With GSP+ conditions still in progress and the economy underperforming—further affected by the Gen-Z protests, low investor confidence, and excess liquidity—a deferral request may be necessary. While there are pros and cons, industries should not suffer.

Likewise, Pashupati Dev Pandey, President of Garment Association of Nepal, pointed out that the question is not when we should choose to graduate but how prepared we are for the graduation. This is a bit difficult at the time when even the government is considering to suspend existing support such as export cash incentive, he said.

Balram Gurung, President of the Nepal Carpet Manufacturers Association, said that Nepal needs to enhance its competitiveness, as it lags behind other carpet-exporting countries.
Darshana Shrestha, Senior Vice-President of the Federation of Women Entrepreners Associations of Nepal, highlighted that it is a matter of pride for the country but private sector is worried about whether the termination of preferential market access would increase the cost of Nepali products, which is already high due to weal competitiveness.

Govinda Prasad Ghimire, President of the Federation of Export Entrepreneurs, highlighted that higher trade costs continue to pose significant challenges for businesses, underscoring the urgency of prioritizing quality enhancement, technological upgrading, and timely policy reforms.

Madhu Marasini, Senior Fellow of SAWTEE noted that the private sector’s approach toward Nepal’s LDC graduation remains hesitant, driven largely by a lack of confidence.

Dr. Ratnakar Adhikari, Executive Director of the Enhanced Integrated Framework, emphasised that the government should actively engage stakeholders and take them into confidence. He also suggested the need for product and sectoral diversification, and called for the establishment of a multi-stakeholder mechanism with clear plans and roadmaps to effectively monitor, evaluate, and lead the implementation process. According to him, some of the ways to reducing cost of trade are to improving customs efficiency and trade facilitation. 

Published in The Rising Nepal daily on 29 November 2025.