Rising exports

It is a good sign that Nepal’s exports increased by over 9 percent during the first six months of this fiscal year. Significantly, the growth has come along with a sharp drop in imports, helping to narrow the alarming trade deficit. The decline in imports is a result of the government’s wise policy of discouraging consumption. However, for the export growth, we have to laud the private sector that put in tremendous efforts to explore new markets along with promotion in the existing markets.



But the million dollar question is whether this growth rate is sustainable. The latest growth is largely due to a boom in the exports of iron and steel products, a sub-sector in which Nepali manufacturers have neither a competitive edge nor a high production volume. Likewise, a rebound in the export of readymade garments and woolen carpets also contributed to the rise in exports. But given a history of unpredictable upheavals in the export of these products, there is ground enough to question their sustainability.



This is where the role of the state comes in. We have pointed out many times that two critical problems - rigid labor law and lack of specialization - hobble Nepal’s export industry. In the absence of flexible labor laws, Nepali manufacturers have been forced to put up with unproductive labor, fueling production cost. This must change and industries should have the right to adjust their labor force as per their needs.



Likewise, the establishment of processing zones for carpets, garments and food products with all the ancillary industries and trade facilitating services within the same premises and close to the export customs points can reduce transit and transport costs. It can help impart competitiveness to Nepali industries reeling under high transit and transport overhead. The private sector has long been demanding these facilities. Unless the government responds, Nepal will not be able to sustain its export growth. Apart from this the government must show promptness in implementing export promotion programs like the direct cash incentives promised to exporters in the current fiscal year.



Since long back, Nepal´s export has relied on a handful of products. The government recently unveiled a National Trade Integration Strategy, identifying 19 potential products which Nepal can really bank on to boost its out-bound trade. However, it has not come up with a program to implement the strategy. There should be a comprehensive package in place to address structural as well as supply-side constraints. We urge both government and the private sector to work in a committed manner towards achieving this goal.

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