Nepal is gearing up for crucial trade negotiations with the world’s second largest economy to secure tariff-free export facilities. But lack of exportable products that can compete in the flourishing Chinese market is likely to be a main impediment to benefitting from such facilities even if they are extended to us. Undoubtedly, the alarming trade deficit with China of around Rs 42 billion is a real concern for a country that is already groaning under a deepening crisis in its balance of payments, which tracks inflow and outflow of foreign currency. The ratio of Nepal’s export to its import has reached an alarming level, with total export financing only 16 percent of its total import.
Sandwiched between the two economic powerhouses, India and China, Nepal has plenty of opportunities to expedite its pace of development by exporting to the world’s fastest growing markets. Both of Nepal’s neighbors have been friendly towards the idea of opening up their markets to Nepali products. India has offered tariff-free entry for almost all goods produced in Nepal while China also has mooted a zero-tariff import regime for 4,721 goods from the Least Developed Countries, which include Nepal. Unfortunately, plagued by three persistent evils – energy crisis, fragile security and labor unrest – the business environment in Nepal has become so adverse that nobody thinks of starting new ventures here to tap the rapidly emerging market potential in the cities of contiguous India and China.
Against such a scenario, we have argued many times that, for the short term, we should focus on production and export of commodities that have a natural immunity against the three evils. Among these no doubt are agricultural products. There are already encouraging signs that Tibet, with a population of around 30 million, can be a lucrative market for Nepali agricultural products. So we believe the upcoming Nepal-Tibet Trade Facilitation Committee talks to be held in May in Kathmandu should focus on exploring ways to boost Nepal’s agro exports to Tibet, particularly cereal and meat exports.
Non-tariff barriers have also been a major problem in fostering Nepal-China trade. For example, Nepal’s recent attempts to export meat products to China failed after Chinese quarantine authorities labeled them poor-quality. We think it is the serious non-tariff barriers that Nepal should raise at the upcoming secretary-level talks with China. But at the same time, Nepal should also put in efforts to address concerns that the China quarantine has raised. Similarly, Nepal needs to raise issues related to improving infrastructure and facilities at Tatopani customs and the frequent complaints that Nepali traders are harassed at the customs points by Chinese security personnel and customs officials.