Ministry of Commerce And Supplies - Enhanced Integrated ...

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N T I S2010Cost and Quality of Infrastructure: The cost and quality of infrastructure is a major problem for the sector.Electricity, telecommunication, and oil/fuel (for backup power) are essential infrastructure components.Companies face load-shedding up to 18 hours per day. Electricity generated by diesel is much more expensive,which is made more critical due to occasional shortage of fuel.Regarding telecommunication infrastructure, previously Nepal only had a satellite connection. Now thecountry has a fibre-optic cable routed through India and another one with Tibet/China has recently beenconnected as well. Though there are plans to increase the bandwidth capacity, the existing capacity is stillseen as a constraint and some respondents said it was insufficient to provide IT services that require constantconnectivity to the client. Data bandwidth cost is very high, according to some industry sources, five timeshigher than in India. 109Domestic Demand: The domestic demand for IT services comes from government, travel and tourismindustry, banks, engineering consulting houses, and other IT companies, but the services provided are oftenvery different than the ones provided by export-oriented firms.Business Environment: The general business environment is not good, in particular due to poor infrastructure(mainly electricity). Service providers reported also about a lack of venture capital. crimes, inflation, and theunstable political situation have also been stated as being hindrances to investments in the sector. However,the country has a favourable FDI regime, with no legal restrictions for repatriating earnings. Administrativesupport is not considered to be good due to some informal costs.Government Initiatives and Donor Involvement: Government initiatives include the formulation of theInformation Technology Policy 2000 and its subsequent revision in 2004, the passing of the ElectronicTransaction Act 2061 and the establishment of HLCIT. Private sector exporters are provided with VAT (ValueAdded Tax) exemption in the foreign currency earned (0 per cent VAT for software export). There is a UNDPproject on ICT for Development. UNCTAD (2010) currently completed the policy review of the sector. 110 ADBis implementing a US$25 million project that is primarily addressing access to ICT services in rural areasof Nepal.The major institutions involved in the development of the IT sector in Nepal include the HLCIT, NationalInformation Technology Centre of Nepal, Nepal Academy of Science and Technology (NAST), ComputerAssociation of Nepal (CAN), Internet Service Provider Association of Nepal (ISPAN), IT Park 111 , and FNCCI.Prospect for Domestic Supply Conditions: There are prospect for adding new products like CAD, 3-D animationand developing software for new sectors such as banks, transport and telecommunication R&D, better training,quality education and better internet connectivity could improve value addition.109See Artha Express, http://www.arthaexpress.com.np/news.php?ncat=9&nid=649. An optical fibre backbone has been laid across the EastWest Highway of Nepal and so the country has an optical fibre backbone in the entire length. The country is now connected to India throughfibre links via different connecting points and it is also now connected with China through a 110 km long optical fibre backbone, offeringNepal the leverage to establish a transit communication route between China and India. The fragmented effort of acquiring bandwidth frominternational network service providers is also responsible for increased cost of bandwidth.110According to the report, despite having lots of challenges and problems, Nepal has plenty of opportunities for local and export-oriented IT andcomputer services. The US, EU, Asia Pacific countries and Japan are the main export destinations.111Currently, the only IT park of Nepal is located at Banepa, which is an outskirt of Kathmandu. Due to the frequent strikes and blockade of roadand traffic, it is still not fully occupied. Recently, HLCIT signed an MoU with IBM, which has already established a research centre in the ITPark.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT103
N T I S2010Market Attractiveness IndexNo MAI could be calculated for this sector due to a lack of data.Index 4: Socio-economic ImpactCurrent Employment and Job-Creation Prospect: There are no reliable estimates for the number of employeesin the industry, except for a 2004 survey by MDT. According to that survey, around 16,000 professional ITworkers existed in Nepal in 2004, of which only a small share of around 1,100 were working in export-orientedcompanies. Estimate in this study, based on interviews with industry experts and several companies, is 2,500employees in export-oriented companies.The average salary was estimated to be US$400 per month in 2004 (MDT). Currently, programmers often earnwell above US$500 a month, with salaries reaching US$2,000 in some cases.Gender Impact: In 2004, only 14 per cent of the employees in the sector were female (MDT, 2004). Similarto other countries, many areas within IT such as programming are male-dominated, but this is not necessarilytrue for other services, such as graphic designing or call centres.Contribution to Skill Development: We rank the sector as very high in terms of skill development. The industryprovides very good rewards for skilled IT personnel; so it is a major incentive for people to acquire skills suchas programming. Some of the companies provide in-house training for new staff.Impact on Development of Disadvantaged Regions: The 2004 MDT survey estimates that 69 per cent of the ITworkers are located in Kathmandu valley and 31 per cent in urban centres outside the valley. Industry sourcestold ITC that currently most of the export-oriented IT companies are located in Kathmandu. In any case, theprospect for such services to be located in remote rural areas is very limited.Energy and Water Constraints: The cost of electricity is not a major cost factor for IT firms, but a regularsupply of electricity is obviously necessary, which is a major constraint at the moment, with load sheddingof up to 18 hours a day. Even the availability of fuel for backup power has been a problem at times. Backuppower is also about four times as expensive as electricity from the grid.Environmental Impact: none104NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT
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Nepal Trade Integration Strategy 20
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Table of ContentsForewordAbbreviati
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Table 2.17 Acreage and Production o
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List of BoxesBox 2.1 A Nepalese IT
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LoD Limit of DetectionM&E Monitorin
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Chapter 1Trading Environment, Expor
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N T I S20101.3 Capacity Development
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N T I S2010Table 1.1Balance of Paym
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N T I S2010Changes in the Nepalese
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N T I S20101.5 Expanding an ‘Incl
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N T I S2010 Index 4 measures the po
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N T I S2010Table 1.9Impact of 19 Ex
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N T I S2010Table 1.10Geographical D
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N T I S20101.7 Declining Importance
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N T I S2010negotiate for the inclus
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N T I S2010Types of Exported Produc
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N T I S2010Table 2.2Large Cardamom:
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N T I S2010Index 4: Socio-economic
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N T I S2010Index 1: Export Performa
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N T I S2010exporters. Nepal permits
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N T I S2010RankCountryExports Nepal
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N T I S2010like China and Australia
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N T I S2010The opportunities for pr
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N T I S2010Lentils are subject to o
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N T I S2010Production Capacity: Nat
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N T I S2010Gender Impact: This sect
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N T I S2010Export Prospect: Accordi
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N T I S2010Cost and Quality of Infr
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N T I S2010Attractive markets for T
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Page 76 and 77: N T I S2010# Botanical Name 41 Spec
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Page 86 and 87: N T I S2010Attractive Markets for S
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Page 92 and 93: N T I S201012345678910# Name of Ste
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Page 98 and 99: N T I S2010The value added of those
Page 100 and 101: N T I S2010sheep population, which
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Page 104 and 105: N T I S2010Index 2: World Market Co
Page 106 and 107: N T I S2010There are also about 24
Page 108 and 109: N T I S2010Index 1: Export Performa
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Page 112 and 113: N T I S2010Contribution to Skill De
Page 114 and 115: N T I S2010Types of Exported Servic
Page 118 and 119: N T I S201016) Health ServicesBackg
Page 120 and 121: N T I S2010medical services are bei
Page 122 and 123: N T I S201017) Education ServicesBa
Page 124 and 125: N T I S2010should be interpreted ca
Page 126 and 127: N T I S2010foreign students. The me
Page 128 and 129: N T I S2010Under mode 4 (presence o
Page 130 and 131: N T I S2010Index 4: Socio-economic
Page 132 and 133: N T I S2010generate revenue of US$3
Page 134 and 135: N T I S2010monopsony power. Several
Page 136 and 137: N T I S2010The possibility of direc
Page 138 and 139: N T I S2010Dairy Products, specific
Page 140 and 141: Chapter 3Access to the Indian Marke
Page 142 and 143: N T I S2010The Nepal-India Trade Tr
Page 144 and 145: N T I S2010Most issues reported abo
Page 146 and 147: N T I S2010Nepalese Domestic Issues
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Page 150 and 151: Chapter 4Access to the Chinese Mark
Page 152 and 153: N T I S2010products must be wholly
Page 154 and 155: N T I S2010The findings discussed h
Page 156 and 157: N T I S20104.5 Other Impediments to
Page 158: N T I S20104.7 Recommendations: Cha
Page 161 and 162: N T I S2010inflow between 2000 and
Page 163 and 164: N T I S2010Industrial Parks and SEZ
Page 165 and 166: N T I S2010Lack of up-to-date polic
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N T I S2010Apart from the critical
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N T I S2010capabilities in all five
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N T I S20105.5. Combining Investmen
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Chapter 6Trade FacilitationN T I S2
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N T I S2010In the 2005 Trade Facili
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N T I S2010The latest phase of impl
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N T I S2010improve efficiency. Few
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N T I S2010Figure 7.1Future Organog
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N T I S2010EU countries, special pr
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N T I S2010Act 1980. So far, 130 fi
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N T I S2010The current projects inc
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N T I S2010The NBSM as a secretaria
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N T I S2010Many more organizations
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N T I S2010Table 7.8Existing Nepal
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Table 7.9Standards Issues for Ten E
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N T I S20107.14 Priority Actions an
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N T I S2010It is not clear what amo
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N T I S2010GeneralNepal’s general
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N T I S2010a crucial part of the PR
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N T I S2010residue limits (MRLs) ar
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N T I S2010The viral diseases chirk
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N T I S2010SPS issues Affecting Tra
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N T I S2010Indian phytosanitary sta
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N T I S20108.5 Conclusions and Reco
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N T I S2010Simpler requirements suc
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Table 8.4Summary of Export Environm
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N T I S2010To register a patent, a
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N T I S2010breaches of law. The Nep
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N T I S2010Intellectual Property is
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Chapter 10Barriers to Service Trade
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N T I S2010Constraints in the touri
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N T I S2010Table 10.2Nepal GATS Com
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N T I S2010locations favourable for
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N T I S2010Barriers to Exports of H
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N T I S2010Institutional IssueThe s
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N T I S2010 Strengthening sub-natio
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N T I S2010Observations from enterp
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N T I S2010Nepal Ginger Producers a
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N T I S2010 Helping paper manufactu
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N T I S2010Computer Association of
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N T I S20105. Also related to the a
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N T I S2010The key principles inclu
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N T I S2010That being said, Nepal h
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N T I S2010Nepal Business ForumOn M
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N T I S2010Third, capacity developm
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N T I S2010expected to emerge from
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N T I S201012.7 Possible Options fo
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N T I S201012.8 RecommendationsThe
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N T I S2010GoN / MoF (2009), Econom
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N T I S2010Thapa, Ajit N.S. (2006).
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N T I S2010NEPAL TRADE INTEGRATION
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N T I S2010MainOutcomes Recommended
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N T I S2010NEPAL TRADE INTEGRATION
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N T I S20102. GINGERStrengths Tradi
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N T I S20104. LENTILSStrengths High
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N T I S20105. TEAStrengths Very fav
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N T I S20106. INSTANT NOODLESStreng
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N T I S2010 Review, simplify, and i
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N T I S20109. SILVER JEWELRYStrengt
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N T I S201011. CHYANGRA PASHMINA PR
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N T I S201013. TOURISMStrengthsNatu
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N T I S201015. IT AND BPO SERVICESS
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N T I S201017. EDUCATION SERVICESSt
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N T I S201019. HYDRO-ELECTRICITYStr
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Appendix 1Methodology for Export Po
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N T I S2010B. Data SourcesThe analy
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Appendix 2Market Attractiveness Ind
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N T I S2010Rank13) Tourism1 Germany
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Appendix 3Updated Legislative Actio
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N T I S2010specified management sys
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N T I S2010than pesticide residues
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Appendix 5Malaysia GAP (Skim Amalam
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N T I S2010E. Document ControlQMS d
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Appendix 7Good Agricultural Practic
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