There is an increasing demand in winter and summer fruits in the local market. In international market, Germany, Japan and Hong Kong have been the importers of Nepal´s orthodox tea. Also, there is a good sign for the increasing demand of Nepali coffee from Japan and Netherlands. It suggests, in addition to the seven agro-food items identified in NTIS, there are other products growing quite fast in Nepal that needs to be supported through technical and financial assistance. The preparatory meeting for the 4th United Nations Conference on LDCs (UNLDC IV) held in Kampala from Oct 28 to Oct, 2010, was aimed at assessing LDCs’ export potential in commodities with an emphasis on horticulture including tropical fruits. Extensive global meetings on sustainable production with regard to particular vegetables and fruits had been discussed.
Horticulture being a sector with huge export potential is constrained with high transportation costs, inadequate storage facilities, a fragmented supply chain, and weak quality standards, which erodes competitiveness. The need is to develop integrated domestic agricultural market by improving communication, transport, distribution and agricultural support services. Public support should focus on credit access, technology and market information.
There is a lack of information about the demand and supply conditions of the potential export products even within the region. A high-level workshop on the “Aid for Trade Facilitation and the Least Developed Countries” was held in Geneva by the World Bank Group in September 2010 to address research, data, and knowledge gaps for the LDCs in the post-crisis world. The recommendations made during this workshop may be worth considering during the UN LDC IV Conference set for Istanbul in May 2011.
The LDCs Report 2010 by UNCTAD states, existing LDC-specific international support measures that work within a more general framework of rules do not satisfactorily address the global economic regimes that are directly relevant for the LDCs. For example, even at the end of the rapid economic growth (2002-2007), the LDCs were living in extreme poverty. Reducing income inequality and promoting inclusive growth was not possible as there was heavy dependence on exports of primary commodities and low-value-added manufactures. Ongoing LDCs’ policy has also failed to reduce productivity gap in agriculture. For example, the food import bill increased from $9 billion in 2002 to $24 billion in 2008.
Nepal has to prepare a vulnerability profile for the forthcoming LDC meeting. It should not seek to graduate from the list of LDCs, instead it should convince the international community to keep on supporting it as long as a new constitution is not written and a stable government is not formed.
Recent financial crisis necessitates a paradigm shift by giving a stronger developmental role to the state by rebalancing the respective roles of the state and markets in national policy framework to develop LDCs productive capacity to produce competitively an increasing range of higher value-added goods and services through investment and innovation. Only focusing on trade and market access may not solve the problem of marginalization of LDCs. Top priority should be to design new international development architecture.
The World Bank as part of its work on trade and international integration invests in workforce skills in entrepreneurs to enhance competitiveness. Net commitments by the Bank on trade facilitation projects in 2010 were $4.6 billion, which was up from $2.4 billion in 2008. Unfortunately, as the high trade costs and trade-related capacity building still remain key constraints in the LDCs, the important question to be raised during the forthcoming meeting of the LDCs is how to increase aid effectiveness for growth by lowering trade transaction costs.
There was a 12 percent contraction in trade volume in 2009 due to macroeconomic conditions as a result of global economic recession. In addition, there was also a tightening in the availability and terms of trade financing. Regulators’ flexibility needs to be cautiously executed to safeguard the probable negative impact from Basel I and Basel II. For example, the decisions on providing directives with regard to capital adequacy of banks and their exposures to risks through lending and other operations should be carefully executed especially on the availability of trade finance.
Trade promotion measures in the absence of both national environment, especially political stability and export-friendly enabling environment, will have no meaning. Nothing much were achieved in sustaining inclusive growth, creating employment opportunities and reducing hardships at household level, despite the fact that study has shown the LDCs have scored high with regard to their commitments. To sustain enabling environment, Nepal should consider restructuring sound domestic policies from the perspective of fiscal decentralization under the proposed system of federal governance. An immediate step is recommended to be taken for the provision of effective trade support services and targeted firm-level support. A sustained investment in human capital; comprehensive technology support for SMEs; access to industrial finance at competitive interest rates and an efficient and cost-competitive infrastructure are the proven indicators for creating enabling environment.
Structural change in productive capacity through accelerated FDI inflows has facilitated growth. Success in export earnings is reflected in domestic entrepreneurship, an issue mostly neglected in Nepal. Out of the $39.3 billion FDI inflows in 2008 that went into the LDCs, most of the inflows were in Africa. In the absence of aforementioned enabling environment, in Africa, FDI contributed to export development but not to export diversification and value addition.
The Committee for Development Planning (CDP) undertakes, once every three years, a review of the list of LDCs based on threshold levels for each of the three criteria i e Gross National Income (GNI) per capita; a Human Assets Index (HAI); and an Economic Vulnerability Index (EVI) to report to the Economic and Social Council by recommending either to add or remove from the list of LDCs. Although Maldives will be graduated from Jan 1, 2011, the nation will have to prepare itself to adjust to a range of new challenges. For example, alternative policy has to be designed before the removal of trade and development preferences. Maldives has been working together with international partners to design and implement an effective transition strategy.
Program of Action for the LDCs for the decade 2001-2010 also encompasses five strategies such as fostering a people-centered policy framework; strengthening productive capacities; building human and institutional capacities; reducing vulnerability and conserving the environment; and resource mobilization. The assessment of these programs to understand opportunities and threats is important. Nepal is currently wrestling with a series of conflicting macroeconomic data. Growth estimates, inflation targeting, aid commitment and productivity, poverty and inequality etc are being used to safeguard the false and non-implementable promises of the ruling governments. It necessitates Nepal to prepare a vulnerability profile for the forthcoming LDC meeting. It should not seek to graduate from the list of LDCs, instead it should convince the international community to keep on supporting it as long as a new constitution is not written and a stable government is not formed.
bishwambher@yahoo.com
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