Trade diversification still remains a slogan

Kathmandu, July 19

After getting bruised by the 6-month long Indian blockade about four years ago, Nepal had announced to diversify its international trade with immediate focus to Chinese market.

But the country has failed to diversify both of its exportable goods and foreign markets. Nepal’s trade concentration to and dependency on India has further solidified in the last four years.

Of the total trade of Rs. 746.9 billion in the first eleven months of 2015/16, about 62 per cent had happened with India, 16.4 per cent with China and 21.6 per cent with other countries.

India’s share in total export from Nepal was 56.1 per cent and China’s 2.4 per cent then.

After four years in 2018/19, Nepal’s trade with the northern neighbour has gone down both in terms of trade balance and export share.

In Rs. 1387.6 billion trade in the first eleven months in 2018/19, Nepal’s trade with India is 64.8 per cent and China 14.4 per cent. Export of goods to China has come down to 2.2 per cent while with India it has gone significantly up to 64.4 per cent.

At the same time, Chinese import to Nepal has also fallen to 14.4 per cent in 2018/19 from 15.1 per cent four years ago, but Indian imports have shot up to 64.8 per cent now from 61.5 per cent then.

For Nepal, trade diversification means diversification of both the import and export markets and expansion in the varieties of exportable goods.

But the concept of diversification couldn’t be realised even within the context of immediate neighbours.

“There has been no improvement in terms of diversifying the markets and products. Nepal has particularly failed to boost the trade with China,” said Dr. Posh Raj Pandey, a trade expert who heads South Asian Watch Trade, Economics and Environment (SAWTEE).

He said that trade with China was hampered by Non-Tariff Barriers (NTB) like customs clearance and complex documents.

Although the northern neighbour had announced to allow duty-free entry of about 5000 plus Nepali products, the list does not include the items on which Nepal has competitive advantage.

“What is the use of providing duty-free entry to the goods like airplane and nuclear technology in terms of Nepal?” asks Dr. Pandey.

Chairman of Trade Committee at the Nepal Chamber of Commerce Rastra Bhushan Chakubaji said that there were multiple hassles while trading with China.

“Apart from other requirements, companies in both the countries must obtain license from Chinese authorities to practice the international trade,” he said. “Nepali traders send the goods in a small quantity to many importers in China so it’s almost impossible to have all importers with license.”

Chakubaji suggested creating trading house in both the countries and facilitating the export to China. “We must create a strong collaboration between the public and private institutions to advance trade with China. It is a good market,” he said.

Dr. Pandey also emphasised on public-private collaboration to develop the trade with China in Nepal’s favour but stressed on strong policy mechanism to increase the exports.

“There must be a synchronisation in trade, industrial and fiscal policy. In addition to it, a separate strategy must be created, if we had to improve the trade with China,” he said.

Published in The Rising Nepal daily on 20 July 2019.