KATHMANDU, June 23: Though the total exports of Nepal has been on a rising trend, albeit slowly, the case is opposite with China.
According to a data of the Nepal Rastra Bank (NRB), the exports to China plunged 29 percent in the first ten months of the current fiscal year 2018/19 with Nepal shipping goods and commodities worth Rs 1.78 billion to the northern neighbor. However, the total exports of the country rose 18.1 percent to Rs 78.53 billion as of mid May.
While the exports to China have been falling, the imports to the second biggest trading partner have gone up by 33 percent to Rs 169.23 billion, driving up the trade deficit of Nepal.
The NRB data shows that Nepal’s trade deficit with China in the review period widened 34.3 percent from a year ago to Rs 167.44 billion. The data shows that the exports of Agarbatti (incense), Pashmina, Silverware and Jewelries, Tanned Skin, Tea, Wheat Flour and Woolen Carpet, among other major products, fell in the review period. The decline in the exports to China comes as a setback for the government which has been vowing to improve the worsening trade position of the country.
Trade officials admit that the country has not been able to produce much to export to the northern neighbor country despite huge potential. “I cannot comment now on the recent decline of the exports to China. However, it is true that our export basket of commodities to China is small despite a huge potentiality for the exports,” said Sarad Bickram Rana, the executive director at the Trade and Export Promotion Centre -- an agency under the Ministery of Industry, Commerce and Supplies.
“Making the matter worse, we have not been able to resolve various non-tariff barriers including the quarantine issues with China. They have also hit our exports,” he added.
Trade experts say that Nepal has not been able to identify and churn out new exportable commodities in line with the demands in Chinese markets. Some suggest possibility of underinvoicing on the exports of some commodities to China as a reason for the recent decline in the value of the exports.
“Our analysis last year had found that there was a massive level of underinvoicing in the export of hand-knotted carpet to China. The decline in the exports may indicate that the situation has not improved yet,” said Rana.
Earlier last year, the TEPC had said that its analysis found that hand-knotted carpet producers were exporting their product at an average price of $20 per square meter compared to the minimum production cost of $100. While China has been offering duty-free, quota-free market access to 8,030 Nepali goods, the trade balance of the two countries has long been in favor of China as Nepal has failed to reap such facility offered by its northern neighbor.
However, Rana has a different take on this benefit. While the list of products that China offers Nepal as duty-free and quota-free access is long, there are only few commodities that Nepal in real can export, according to Rana. “It’s better to get lesser number of commodities under such facilities with high potential for exports with no non-tariff barriers.”