INTRODUCTION:
With the objective to contribute to Nepal’s graduation from a least developed country (LDC) to a developing country by 2026 AD and to reduce poverty, the Commerce Policy 2072 BS (CP) replaced the existing commerce policy of 2009 AD. The newly formulated CP had high hopes to re-boost the economy after the devastating earthquake of 2072 in Nepal. the CP was developed considering the factors and developing objectives as listed in the objective section below:
It is clear that the LDC graduation for Nepal is soon due and the target for achieving the SDG goal no. 1 which is “no poverty” is 2030 AD, a necessary review of the outcome and contribution of CP has been done in this study. The review of CP by World Trade Organization (WTO) and the Government of Nepal which was carried out in 2018 AD covers the policy and programs implementation of the CP. This study carried out by MaDRA with the Ministry of Industry, Commerce and Supply covers the analysis of the change in the trade situation after the policy came into effect in 2072 BS. Along with this, the review finds out how the policy contributed towards economic wellbeing and poverty reduction in Nepal along with the examination of the compatibility that this CP holds with trade treaties and other national policies.
OBJECTIVE:
i. To review the strategies, policies and sectorial development brought forward by CP.
ii. To analyze the overall contribution of CP in the commerce sector and export promotion of Nepal.
iii. To review the compatibility of CP with international trade treaties and national policies.
iv. To identify limitations of CP and suggest innovative policy recommendations in both strategy and policy levels.
v. To provide policy recommendations that can benefit the commerce sector of Nepal and in a larger context the economy of Nepal
FINDINGS:
The findings derived from the study are as follows:
1. There have been some noteworthy improvements as the trade situation of Nepal has gone through various changes. A set of goods with high export potential has all been identified by NTIS, TEPC and the CP. Along with this, the identification of markets for the goods has been done. Also, trade treaties have been respected and utilized to some extent. Nepal, being a country in between two giant markets i.e.; India and China have high trade potential through border facilitation. Nepal’s position and ranks have improved in international indicators such as the World Bank Group’s (WBG) Doing Business (DB) Index, Logistics Performance Index (LPI), the World Economic Forum’s Enabling Trade Index and the International Trade Center’s Trade Performance Index.
2. The special emphasis of Commerce Policy is on strengthening the supply side to increase exports and reduce trade deficits. Nepal has been making efforts to strengthen supply of products with competitive advantage since 2015. This has resulted to increase in export of Animal/vegetable fats and oils, man-made staple fiber and coffee & tea with stronger export capacity of such products. In figure, animal and vegetable fats and oils worth NPR. 111.302 million were exported in 2014/15 and the amount has grown to NPR. 12.952 billion in 2018/19. Likewise, exports of man-made stable fiber were worth NPR. 6.64 million in 2014/15 which has risen to NPR. 9.78 billion by 2018/19.
3. The imports are increasing annually at a much faster rate than exports. The main products imported are oil, gold, iron and steel, clothes, pharmaceutical products, cement, electronic appliances, food and vehicles. Nepal became the 95th largest importer in the world in 2018-19 with import worth $14.2B. The import has increased at an annualized rate of 9.5% during the last five i.e. from $7.9B in 2014/15 to $14.2B in 2018/19. This has led to trade deficit that keeps on increasing as the years pass by. In 2014/15, trade deficit was NPR. 700 million which has been increasing ever since. In 2018/19, trade deficit increased to NPR. 1.32 billion.
4. Nine thematic strategic were set by Commerce Policy 2072 with major focus in institutional development and amendment of Board of Trade composition, upgrade and reform TEPC into Trade Promotion Authority, amendment of existing legal provision applicable to export and promote the foreign trade, formulate new laws and ratify them from the House of Representatives. Also the CP envisaged a stable monitoring and evaluation unit for implementation of the comprehensive policy strategies. For the same, a co-ordination and implementation unit would be in place with budget allocation and, the unit annual short-term program and long-term program in trade sector development and policy implementation.
5. It is also the responsibility of CP for monitoring and evaluating the implementation of trade policies. The task should be conducted by co-ordination and implementation unit which will require budget allocation. Although few CP strategies require initiation, majority of the strategies have begun. One such strategy still awaiting initiation is the upgrade and reform of the TEPC into the Trade Promotion Authority. Some legal provisions such as counter-veiling, antidumping and safe-guarding are approved by the Parliament which some provisions are yet to be tabled in the Parliament.
CONCLUSIONS & RECOMMENDATIONS
Nepal has been significantly improved in economy even after the economic downfall due to the earthquake of 2015. Since the formulation of Commerce Policy 2015, Nepal has faced different challenges. The declaration of constitution in 2015 meant that the three levels of government would have a stable government, thus ensuring political stability in the country. On top of this, commerce policy was also revised in 2015 with the objective of leaping forward in trade and commerce, which the country had been lagging behind in. The country was dedicated to rebuilding its economy and is still trying to do so. Nepal is now focusing on increasing production, generating employment and being more self-sufficient or less-dependent on others.
Commerce Policy has put special emphasis on strengthening the supply side to increase exports and reduce trade deficits. Since 2015, Nepal has been making efforts to strengthen supply of products with competitive advantage.
Although the data presented in Chapter 2 is evident that the export side has made a lot of progress over these years with the country focusing to export goods with competitive advantage, it is also evident that simply focusing on exports is not enough if the imports are not controlled. The imports have more than doubled over the past 5 years which is higher than the rate of increase in export. Therefore, the objective of minimizing trade deficit is yet to be fulfilled.
RECOMMENDATION:
1. It is needed for the ongoing Commerce Policy to be reviewed and amended by the federal Government who should also address the trade issues prevalent after Nepal’s graduation from the LDC to ‘developing country’ status in 2026.
2. Additionally, an autonomous think tank consisting of experts and professionals in international trade should be established under the MOICS to address shifts in national trade development.
3. It is essential for the CP to be made in compatibility with the Five Year Action Plan (2075/76 – 2079/80) prepared by the MOICS. This action plan should be owned by BOT after its restructuring.
4. It is necessary to restructure the BOT because the existing structure is too large and fails to deliver objectives set forth by their own strategies. So as to review foreign trade issues periodically in order to present recommendations to the Government, BOT should receive recommendations on policy matters from the think tank within MOICS.
5. The provincial government’s needs and preferences should be addressed by CP.
6. It is observed that the co-ordination with the private sector stakeholders such as FNCCI / CNI / Chamber of Commerce and similar institutions is limited. Thus, it is recommended to establish formal communication with those entities and record each communication.
