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Introduction
The Government Of Nepal (GoN) introduced Trade Policy 2009, replacing the Trade Policy 1992 GoN launched the Nepal Trade Integration Strategy (NTIS) in 2010 as an action-oriented short- to medium-term strategy for export sector development and promotion. NTIS has identified four major challenges to Nepals export sector: i) to diversify and expand the export basket, ii) to diversify and expand export destinations, iii) to move up the value chain, and iv) to ensure a robust and positive impact of export on inclusive growth.
Introduction
(Cont..)
NTIS has identified 19 products12 goods and 7 services. Of the 12 identified goods, lentil and tea are two agricultural products that have high and medium export potential and medium and high socioeconomic impacts, respectively.
This presentation is based on three-day training programme on International Trading System for trade policy-related stakeholders, particularly Government officials, on 7-9 February 2012 and Field study in Eastern Boarder points from 21 to 27 February, 2012.
Objectives
To assess the export trend of lentil and tea.
To examine the strength of export potential and explore the market potential of these products.
To briefly analyze the value chain of these products. To identify the majors barriersboth supply-side and market access barriersfacing these products, and To prepare recommendations for policy reform and agendas for trade negotiations.
Farm land of tea (in ha) Tea Small Total farm garden farming land Jhapa 6107 2981 9088 Ilam 1347 3794 5141 Panchathar 382 456 838 Dhankuta 230 212 442 Terathum 37 207 244 Others 960 5 965 Total 9063 7655 16718
Districts
Sarlahi Dang Rautahat Bara Kailali Bardiya Parsa Banke Sunsari Chitwan Total of 10 districts Total of remaining districts Total of Nepal
1.11 0.73 0.92 1.11 0.72 0.81 1.13 0.76 0.83 0.83 0.88
52,444
3,2974
28.0
21.73
0.63
187,437
151,758
100
100
0.81
Note: Red color indicates top five values of respective columns Source: Ministry of Agriculture and Cooperatives, 2010
2001/02 1077372
2002/03 1118432
6022
5429
1452259
1385743
80
193
0.01
0.01
2003/04 1330364
2004/05 1316448 2005/06 1284462 2006/07 1537973 2007/08 1326148 2008/09 1712214
7590
2708 4680 8212.44 18355.83 56767.5
1431888
1451106 1469314 1547224 1685698 1567688
884
4,316 4,623 7,000 8,600 8,889
0.57
0.21
0.06
0.30 0.31 0.45 0.51 0.57
0.36
0.53
1.38 3.32
Source: FAOSTAT
Source: FAOSTAT
Bangladesh 11% Iran (Islamic Rep. 2% Pakistan 4% Algeria 4% Egypt 5% United Arab Sri Lanka Emirates 6% 7%
EU(27)ex.int 10%
Turkey 8%
Source: FAOSTAT
Applied MFN Tariff and Preferences Tariff for Nepal in Major Importing Countries
S. N 1 2 3 4 5 6 7 Tea Countries EU Russian Federation United Kingdom United States UAE Egypt Pakistan For Nepal 0% 0% 0% 0% 0% 2% 10% MFN Countries 6.5% India 9.2% Bangladesh 6.5% EU 3.2% Turkey 3.1% UAE 10.6% Sri Lanka 12.8% Egypt Lentils For Nepal MFN 0% 0%* 0% 9.65% 5% 4.48% 0% 30.4% 11.1% 33.1% 3.3% 25.6% 8.9%
8
9 10
33.87%
0% 0%
- Algeria
15.3% Pakistan 3.1% Iran
5%
0% 5%
25.4%
18.2% -
Source: ITC, 2007, For MFN: WTO Tariff Profile 2011; *WTO Tariff Analysis Online 2011
RCA on Tea
0.93
1.37 20.43 18.39 24.48 21.68 53.29 55.41 42.47 51.81
RCA on Lentils
134.05
185.11 347.65 188.27 148.96 109.92 58.04 341.60 699.87 540.53
RCA = Revealed comparative advantage Source: ITC, UN Comtrade, and FAO STAT.
Recommendations
Bilateral Level Negotiation with GoI is required to remove the custom cess, and the local development charge levied on Nepali cargo on the way to Bangladesh through the Fulbari-Banglabandh route, open its auction market to Nepali tea for the time being, either remove the testing requirement or accept report of Nepalese laboratories or establish such laboratories at major customs create a permanent dispute settlement mechanisms to deal with bilateral trade disputes with the participation of all stakeholders including exporters Negotiation with Government of Bangladesh is required to create a permanent dispute settlement mechanisms to deal with bilateral trade disputes with the participation of all stakeholders including exporters Multilateral level Harmonize the weekend holidays or develop alternative approach to facilitating Nepal-Bangladesh trade.
National level In the long run, there is a need of tea auction market in Nepal for facilitating export of tea in a formal way. GoN has to bring a lentil farming extension programme. A scientific price support mechanism would motive farmers to produce lentils. In the short run, interest rate subsidy on credit to agriculture-based exporting firms is recommended. The government should explore the option of introducing a Ration Card facility for tea industry laborers Separate power grid in industrial areas is required to provide adequate power supply to the processing firms adequately. For a long-run solution, electricity generation for domestic use should be increased. Government has to bring sustainable irrigation programme targeting tea farmers. Drip and sprinkler irrigation and their implementation in a participatory approach with farmers groups would address the problem of irrigation for the time being. There must be timely distribution of quality chemical fertilizers to tea farmers. Establishment of chemical fertilizer-producing factories in the country (as prioritized by the Industry Policy 2010) could be an effective long-term solution.
National level There is a need for harmonizing all local taxes. Fees of NTWC seem higher for bulk exporters. Its rate should be set on the basis of consignment instead of export value. GoN has to initiate programme of GAP and GMPs in tea and lentil sectors. Eligibility criteria for export incentive are to be made liberal (To benefit them who are exporting to India) The number of trade unions has to be reduced. Prevailing rigid labour law should be relaxed. An all-party consensus on not politicizing labour unions is required. The security situation should be improved and the rule of law ensured. GoN needs to speed up the process of accrediting Nepali laboratories, and initiate the process for mutual recognition with destination countries.