|
|||
|
|
|||
|
NEPALESE EXPORTS |
At The Crossroads Despite market-driven policies adopted by the government, the export sector fails to modernize itself. With WTO and SAFTA in the offing, message is loud and clearóshape up or phase out By BHAGIRATH YOGI
Things seem to be changing for better, at last. After decades-long inward-looking policies, both the government and Nepali private sector seem to be waking up to the new emerging realities around the world. As soon as Tradex 2000 concludes this week, tenth Himalayan Expo will be commencing at the Bhrikuti Mandap in the capital from middle of this month. Nepal Trade Fair 2000, organized by the government-run Trade Promotion Center, kicked off in the capital on Tuesday. It coincided with the first-ever `Export Promotion Meeting 2000' (April 7-9) organized by the Ministry of Commerce together with private sector organizations. So, has there really been a significant shift in Nepal's trade policies? The answer may be in affirmative. Till the nineties, Nepalese planners saw high tariff rates on imports as potential source of the revenue. The businessmen, on their part, looked forward to opportunities to make money taking benefit out of restricted import regime of neighboring India. No more. With Indian economy opening up fast and liberalization of Nepali economy side by side, foreign trade in general and export trade in particular got renewed attention from both the officials and business community. According to the report published by Nepal Rastra Bank, the export of garments in the first six months of the current fiscal year 1999/2000 stood worth Rs 6.20 billion whereas export earnings from the carpet stood at equivalent to Rs 4.19 billion. A new export product, pashmina, fetched foreign currency worth Rs 2.71 billion during this period, becoming the third largest exports item. Total exports, during this period, grew by more than 40 percent to Rs 23.42 billion whereas total imports also rose by more than 35 percent to Rs 51.77 billion. Every thing is not as rosy as it looks on the surface. With the multi-fiber arrangement (MFA) coming to an end by the end of 2004, Nepali garment industry will no more enjoy preferential entry under quota system to the US market. This means that they will have to compete in the world market on their own. " Over the last five years, we have improved a lot in terms of quality and timely delivery. But we are yet to become competitive vis a vis other countries in the region," said Uady Raj Pandey, general secretary of the Garment Association of Nepal (GAN). "We don't know where will we stand after the MFA is over." With the capital investment of nearly Rs six billion and giving employment to nearly 50,000 people, garment has emerged as one of the promising sectors for the country's exprots.. Moreover, as garment and carpet together constitute nearly 70 to 80 percent of the country's total merchandise exports any fluctuation in their position will lead a heavy blow to the Nepali economy. Entrepreneurs say that they are trying their best to cope with the changing situation. "Recently, we have started to export our products in non-quota category as well and also to newer markets like the European Union," said Pandey. "We need government's support and assistance in reducing our cost of production in order to become competitive." Adds Rajendra Shrestha, first Vice President of Central Carpet Indsutries Association (CCIA), "We want collaboration with the government in identifying new markets, improving the quality and design of our products and simplifying procedural matters. If these thigns happen, carpet industry will continue to contribute to national economy as one of the biggest foreign exchange earning sectors and employers to Nepali workers." Nearly 1200 members of CCIA are currently employing more than 100,000 workers in the country. But they complain that the governmetn often doesn't respond in time to address their problems. For example, it has yet to revise the floor price of US$ 54 per square meter of carpets for export purposes though most of the businessmen sell their products to buyers at much lower rate than that to the buyers at local market. "We want that the government fix a suitable minimum ceiling on a timely and periodic basis," said Shrestha. Experts point toward broader issues. "Nepal needs to come out of the present `two-country, two commodity' strucutre in order to expand its export base and make it sustainable," said Dipendra Bahadur Kshetri, economic advisor on Foreign Trade at the Nepal Rastra Bank. The situation becomes vulnerable as more than 80 percent of the country's carpet exports is concentrated in Germany and US is the predominant buyer for readymade apparels. Business leaders also agree that there is a need to revise current policies so as to suit them in the changed context. "We must re-orient our export strategies in order to become competitive in the world market," said Kishore Kumar Khanal, chairman of the Export Promotion Committee of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). "We should develop export processing zones and export operating units where production could be done in a hassle-free environment." The government has set aside Rs five million to develop such zones in Birgunj alongside the Inland Container Depots, popularly known as the "dry ports." The construction of dry ports at Birgunj, Bhairahawa and Biratnagar with the loan assistance from the World Bank will have a far-reaching impact in Nepal's foreign trade, say entrepreneurs. What is needed now is to assess new emerging scenario and act toward removing the existing bottlenecks. "We should pay more attention on developing our production infrastructure and expanding our production base. In that case, becoming a member of global trading regime like the World Trade Organization will open up new opportunities for Nepal in comparison to possible adverse impact upon certain sectors," says Dr. Posh Raj Pandey, National Program Manager at the UNDP-assisted Nepal's Accession to WTO Project. "But, the first and foremost challenge is to maintain quality and standard of our products." That is where Nepal lags far behind. Not only the government, the private sector, too, has not paid adequate attention to invest into research and development activities to enhance the quality of domestic products. They are yet to adopt to new technologies like e-commerce. "Both the public and private sectors suffer from shortages of technical and management skills. The lack of skilled human resources and consequent weaknesses in institutional capacity contribute to delays in the implementation of investment projects," said Country Operational Strategy on Nepal published by the Asian Development Bank last year. "Mechanisms to provide skills and training that are relevant for raising productivity in agriculture and industry will be particularly crucial to future economic development." As Nepal is yet to adjust itself to the new realities, other countries in the region are moving fast forward. India is Nepal's largest trading partner and foreign investor, but also a close competitor for most commodities. The recent EXIM (Export-Import) policy announced by the Indian government aims to consciously promote exports and simplify and rationalize export procedures to achieve a 20percent annual growth rate. India has also decided to set up two free trade zones and convert four of the existing export processing zones into special economic zones. The Indian government has also lifted import restrictions on more than 700 items. "The import liberalization in India can affect Nepali exports to our southern neighbor. If India starts manufacturing products like vegetable ghee, thread, copper wire by importing raw materials, it may hamper our those industries," said Dr. Yuba Raj Khatiwada, chief economic advisor at the NRB. The renewal of trade treaty between Nepal and India in 1996 has opened up a new vista of opportunities for Nepal. It allows duty free access to manufactured goods produced in Nepal. Both exports to and imports from Indis have witnessed a phenomenal growth over the last four years. "It is a win-win situation for both of us. Still (there are) shortcomings on the part of our entrepreneurs as well as our government.. Though the exports have increased, the mass participation of the private sector hasn't come about," said Kishore K. Khanal. While concentrating on third country exports, Nepal has ignored prospcts of increasing exports to as close as neighboring Tibetan autonomous region of China, for example. "Our natural markets are India and Tibet. If we could tap the market in Tibet, it could be both economic and reliable," says Dr. Khatiwada. "There are also possibilities of starting inter-port trade between India and Tibet in a legalized and transparent way." Comparatively cheap labor is considered an advantage for promoting trade and investment in South Asian countries. But, there haven't been any institutional efforts to make Nepali labor force skilled and more productive. Frequent strikes, ever-growing demands of the trade unions and conflict of interest between the employer and employees mark the industrial relation scenario in the country. "That is why, we have demanded separate labor laws for export sectors like carpet," said Rajendra Shrestha of CCIA. "It will not only ensure smooth operations of export-oriented units, it will also give a better deal to the workers." Trade union activists don't agree. "At a time when the existing Labor Act is not fully implemented, we don't see any need of separate laws for the export-oriented sector," said Pushkar Acharya, general secretary of the Nepal Trade Union Congress, affiliated with the ruling Nepali Congress. "Among organized secotrs, carpet and garmetn indsutries are the one which exploit the laborers most. First, they should comply with exisitng rules before demanding any separate law," he added. While points of disagreement are there between the trade union and private sector all do agree that there is a need to set up training institutes to enhance skill of the laborers. "We have proposed of setting up a Trainign Academy to carpet workers in collaboration with the government," said Rajendra Shrestha. "We are also running day care centers to the children of our workers and non-formal education classes for their benefits." Lack of coordination among differnet agencies and scatterign of available resources hasn't helped much to improve the situation. While the government-run TPC focuses on promoting exports to the third countries other than India, Carpet and Wool Development Board focuses on promoting carpet indsutry. But such efforts have had very little impact in a real sense.
"What is needed is a professionally managed dynamic institution with public private. The organization should develop market links, conduct product research, promote products and address other issues," said Dr. Pushkar Bajracharya, professor of management at the Tribhuvan University. "Its financing should be done by charging a nominal service charge." Nepal levies 0.5 percent service charge on the income from the exports. But it has not been used properly for the development of the concerned sector, say entrepreneurs. "Though we have right policies, there are several hassles in their implementation," said Uday Raj Pandey of GAN. Officials, on their part, insist that the governmetn is using resources to develop infrastructure for the facilitation of country's exports. "Through agencies like Export Promotion Committee, we have launched a number of programs for promotion of our exports," said Chandi Prasad Shrestha, spokesman of the Commerce Ministry. "The private sector themselves should be innovative and strive hard to become competitive." Analysts say that Nepal needs to develop coherent strategies as a means to achieve export-led growth. Developing forward and backward linkages of the export sector with other sectors of economy could go a long way in modernizing the country's economy. "Various macro-economic and sectoral policies should be integrated. Legal framework should also be designed to reflect these policies," said Dr. Bajracharya. "The institutional capacity must be strengthened to enable to monitor and evaluate activities and bring forth forward-looking policies and programs," he added. Time is running out for Nepal. Awaiting to become a member of WTO and moving toward South Asian Free Trade Agreement (SAFTA), Nepal can't afford to remain reluctant. Assessing new emerging situation worldwide and positioning herself to meet the challenges is the only way out. The message is loud and clear: shape up or prepare for the worse. ‘The Meeting Is Part Of Our Mission For Market Diversification’ - RAM KRISHNA TAMRAKAR
Ministry of Industry and Commerce RAM KRISHNA TAMRAKAR believes that Nepal must not remain isolation in the rapidly globalizing world. A strong advocate of Nepalís entry into WTO, he spoke to the press last week on the eve of the Export Promotion Meeting 2000. Excerpts: Why did the government decided to organize the Export Promotion Meeting (EPM)? The government has decided to hold the meeting with a view to enhance trade and investment scenario in the country. It would be the first event of its kind bringing together honorary consuls of Nepal from over 34 countries and local business people. The meeting will strengthen Nepal's economic relations with those countries and provide a forum for the promotion of exports. What would be the impact of the Maoist shutdown strike to the meeting? The government has made adequate security arrangements to all the delegates and citizens of the country. We wish that nobody should post hurdles to an all-important program like this, which will have a far-reaching impact upon the countryís economy. What is the governmentís views toward promoting exports to neighboring countries? The Nepal-India Treaty on Trade has played a great role in promoting Nepalese exports to India and inviting foreign investment into the country. We are also aware about export opportunities in Tibet autonomous region of China and will do necessary to tap it. How is Nepalís foreign investment policy? Are you aware about complaints regarding the one-window mechanisms? Our present policies are quite conducive to attract foreign investment. If there is a need of any additional provision, we are ready to bring that. We are fully aware about the complaints related to one window policy. The government is committed to improve the situation and address the genuine concerns. The governments in the past have been talking about market diversification and product diversification. But there hasn't been any significant outcome. Why? The Export Promotion Meeting is part of our mission for market diversification. We want to send our products to as much countries as possible. Nepal Trade Fair will be showcasing more than 50 commodities in nearly 100 stalls ranging from natural resources to computer software. So, there are a lot of promising products which need proper marketing. What would be the impact of 4 percent additional duty levied by the Indian government on all imports? We think that the provision is against the spirit of the bilateral trade treaty. We have already communicated our concerns through diplomatic channel. We have been assured that the Government of India will look into the matters in a positive way. What would be the impact of US Presidentís recent visit to South Asia? We hope that it will attract US investors to the countries in this region. We are hopeful that the US foreign direct investment in Nepal will increase in the future. END ‘Our Export Strategies Have To Be Re-oriented’ — KISHOR K. KHANAL Chairman of the Export Promotion Committee of the FNCCI, KISHOR K. KHANAL heads the Entepe Group of Industries. He spoke to SPOTLIGHT on different issues related to countryís exports. Excerpts: How do you see prospects of the Nepalese exports?
Since we are a very small economy and purchasing capacity of our people is very low, unless we cannot export we can't progress. What we need today is total export orientation. With the signing of the historic 1996 treaty, Indian market has been thrown open to us. Over the last four years, there have been phenomenal increase in our exports to India, and it has crossed 14 billion mark (from 3 billion Rs in 1996). This has led to the increase in imports also (nearly 30 billion Rs). It is a win-win situation for both of us. But, frankly speaking, I see some shortcomings on the part of our entrepreneurs as well as on the part of our government. The need for product development has never been felt here. Though the exports have increased, the mass participation of the private sector hasn't come about. So, what should be our focus vis a vis India? We have to look at those products which give better value addition to the country and good employment. As long as we confine ourselves strictly to the content of the treaty, there will be no problem. We have not been able to tap the IT (Information Technology) market. No industry can expand as fast as IT. IT can expand because this is a brain. India is planning to export software worth US$ 50 billion in the next five years. If we could get even a part of that it would be a dream come true. Other things can wait, but not the IT. What has been the impact of recent Indian budget on Nepali economy? The special additional duty has also been imposed (by the Indian government) on goods imported from Nepal. This is something which is going to make Nepalese products uncompetitive. This provision is against the spirit of the 1996 treaty and should be removed as soon as possible. How do you see the prospects of Nepali exports to Tibetan autonomous region of China? Tibet is a very important market. But unfortunately our trade is based in barter system. If we want to really develop our trade with Tibet, we must go into normal trading practice. Barter business may be good for local people not for bigger trade. How do you see the future of our two major export items, carpet and garments? Let me first talk about the garments. The garment industry initiated in Nepal as a spill over of the Indian quota restrictions. Now the garment has become one of the top export products. But, by 2005, when there will not quota system, they will have to compete in the global market. So, if we want to sustain what we need to do is backward integration. We should concentrate on developing high value addition items, fashion apparels, which can ensure certain comfortable competitiveness for the country. Unless we do that it will be difficult for us to retain the same position. We will have to explore newer markets and develop newer contacts. We can also benefit by employing technologies like e-commerce. We should also concentrate on inviting joint venture investments from garment importing countries. That will ensure longevity of our industries. How do you see the future of the carpet industry? Carpet industry is already witnessing some hiccups. Three years back, over production, sub-standard quality and competition with neighboring countries had only led to deteriorating situation here. If we want to maintain the good reputation of the carpet, the prime requirement is to ensure the quality of the carpet. I have seen low-quality, made in India carpets being sold as Indo-Nepal carpets in German and American markets. Such a practice must be stopped. How do you see the possibilities of linking agriculture sector with the export-led strategy? Nepal's comparative advantage lies in agriculture, but not in traditional one. We can export tobacco, aromatic products, medicinal herbs etc. We have got different topographic and climatic conditions in which diverse crops and plants can be cultivated. So, we must link up agriculture sector while formulating export strategies. Do you see the need of re-orienting our present export policies? Our export strategies have to be re-oriented. A small economy like ours canít live without export orientation. The facilities which the government would provide should be clearly defined and there should be no hassles. |
Send your feedback to the
editor: spotligh@mos.com.np |
