2003年-世界发展银行全球_Nepal___Trade_and_Competitiveness_Study_143页_924kb

Summary of Nepal Trade and Competitiveness Study

Core Content

This document presents a comprehensive trade and competitiveness study of Nepal, conducted as part of the Integrated Framework for Trade-Related Technical Assistance. It provides an analysis of Nepal's economic structure, trade performance, regulatory framework, and policy implications in the context of global trade dynamics and domestic challenges.

Main Points

1. Economic Structure and Trade Performance

• Nepal has a trade-to-GDP ratio of about 50%, with an average tariff rate of 14% and minimal quantitative restrictions, making it one of the most open economies in South Asia.
• The economy is heavily dependent on trade, especially in labor-intensive manufacturing and agricultural products.
• Manufacturing exports grew at an average annual rate of 20% in the 1990s, outpacing overall export growth (15%).
• The share of certain products like carpets and garments in world markets increased significantly (7% and 0.12%, respectively).
• Overall share of Nepal's exports in global exports doubled during the 1990s.

2. Challenges to Trade Potential

• Geographical Constraints: Nepal is a landlocked country with 23 million people, mostly in mountainous or hilly regions, and only 20% of its land is arable.
• High Transport Costs: Distance to the nearest port in India (660 miles) and poor infrastructure increase transport costs and reduce competitiveness.
• Dependence on India: Nepal relies heavily on India for transit routes, with Indian markets accounting for 45% of its exports and 38% of its imports.
• Economic Volatility: The narrow export basket and concentration of exports to a few countries make Nepal vulnerable to global economic shocks.
• MFA Phase-Out: The phasing out of the Multi-Fibre Arrangement in 2005 will reduce the protection for ready-made garments, which constitute 28% of all exports in 2000.
• Domestic Constraints: Ineffective implementation of policies, pending regulations, and a rigid labor market hinder productivity and competitiveness.

3. Study Goals and Findings

• The study aims to identify constraints to trade competitiveness and recommend policy and technical assistance to address them.
• Nepal's trade policies are generally sound, and the country is competitive in a variety of products.
• More than one-third of its export basket consists of "rising-star" goods such as ready-made garments, textiles, and jewelry.
• Productivity is among the lowest in the region, and the business climate is inhospitable, discouraging foreign direct investment (FDI).
• Key constraints include:
  • Delays in customs and transshipment to India's Kolkata port.
  • High infrastructure costs, particularly in transport and power.
  • A rigid, formal labor market.
  • Weak policy and institutional frameworks in taxation, investment, and trade promotion.

4. Role of Trade in Nepal

• Despite structural changes in its exports over the past two decades, Nepal remains dependent on a narrow range of products, mainly ready-made garments and carpets.
• Exports to North America and Europe accounted for more than 50% of total exports in 2000, while Indian markets accounted for 45%.
• Imports are mainly from India (38%) and the East Asia region (33%), with significant informal trade, especially in agriculture.
• Trade has been a driver of economic growth, contributing to an average annual per-capita growth rate of 2.4% in the 1990s, compared to less than 1% in prior periods.
• Trade has stimulated demand-side growth by enabling access to global markets and supply-side growth through liberalization of imports.

5. Poverty Reduction and Trade

• Trade is critical for poverty reduction, especially in employment and encouraging farmers to switch to higher-value crops.
• A simulation exercise suggests that if Nepal can achieve a 5% average growth rate and maintain consumption growth, the poverty line could fall below 30% by the end of FY 2007.
• Trade and its associated improvements in transportation can raise the income of the poor, particularly the urban poor.

6. Macroeconomic and Trade Policy

• Nepal's macroeconomic stability in the 1990s was supported by low public sector borrowing, an exchange-rate peg with India, and high remittances.
• Maintaining macroeconomic stability is essential for sustaining export competitiveness.
• The current exchange-rate peg has served Nepal well in the 1990s by keeping the real effective exchange rate (REER) stable.
• The study recommends ongoing review of the pegging arrangement to ensure competitiveness is not eroded.
• Nepal's trade policy is among the most liberalized in South Asia, with average tariffs reduced from 40% to 14% since 1990.
• The tariff structure follows the pattern of other developing countries, with higher protection for consumer goods and lower for intermediate inputs.
• Additional duties and charges, averaging 3-4%, can be as high as 14.5%, but are generally non-protectionist in nature.
• Preferential trade agreements with India and regional partners (e.g., SAPTA) have become less effective due to the steady decline in tariffs.

Key Recommendations

• Customs Reform: Address delays and improve transshipment procedures to India.
• Infrastructure Development: Reduce transport and power costs to enhance competitiveness.
• Labor Market Flexibility: Develop a more flexible labor market to support productivity.
• Policy Coordination: Establish an apex body to coordinate trade policy and improve institutional capacity.
• Regulatory Improvements: Clarify laws, regulations, and bureaucratic roles to support FDI and SME growth.
• Technical Assistance: Focus on specific bottlenecks such as customs and logistics, as well as broader reforms like labor market changes.
• Trade Promotion: Enhance trade promotion efforts to leverage Nepal's comparative advantage in textiles and agriculture.

Conclusion

Nepal has significant potential for trade growth and poverty reduction, but this potential is constrained by both external and internal factors. The study emphasizes the need for a coordinated and systematic approach to policy and technical assistance to enhance competitiveness and ensure sustainable economic growth.