Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S20104.5 Other Impediments to Nepal-China TradeNepalese Domestic Issues No Nepalese agricultural commodity is currently exported through formal channels to China. Thereis probably a fair amount of informal trade. Cost-competitiveness of Nepalese products is a factor,including infrastructural deficiencies, cost of transport, customs compliance, and standards compliance.Nepal’s inability to guarantee reliable supply quantities is another critical shortcoming; Infrastructural improvements are crucial for Nepal to access mainland China’s markets with its products,particularly agricultural products that are dependent on rapid transportation and those that are subjectto standards and technical regulations; At present, there is only one operational border crossing with appropriate customs facilities, and tradeis very congested and limited; In the area of manufactured products, Nepal needs to compete on the basis of quality, branding, anddesign. Pashmina is a good example of a sector that must create a recognizable brand, focus on quality,and respond to consumer preferences. Pure focus on price will not suffice to retain or improve marketshare in China; In the agro-food sector, one comparative advantage of Nepal over Chinese (Tibetan) is the high valuesector of highland/high hills products, especially organic products. There appears to be a market forthese products in China (as in India). However, work must be done to improve production, transportand storage facilities, and the regulatory framework to comply with Chinese standards; An effort should be made to attract Chinese investments. Special Economic Zones (SEZs) are required toaddress this objective. Chinese investments in SEZs would probably focus on electronics and softwaredesign ventures. Political stability and law and order, together with investment-friendly labour laws,are some of the critical factors in order to attract such investments.Many of those impediments internal to Nepal are not unlike those already identified in the case of Nepal-Indiatrade and are addressed in greater detail in other chapters of this report.Chinese Domestic IssuesNepalese exporters point to several issues on the Chinese side that appear to be having a negative effect ontheir export performance and trade opportunities: Customs facilities and border infrastructure need to be greatly updated and upgraded to take fulladvantage of improved transport links between Lhasa and Beijing; There is huge ‘informal’ trade in handicrafts between Nepal and China. It is a market with huge potential,but it must be formalized to expand to a much larger scale. Informal trade currently occurs particularlybecause of restrictive Chinese policies affecting ‘formal’ trade in these products. This leaves exportsmostly in the hands of a plethora of mainly Chinese traders that purchase handicrafts in Nepal and thenresale in China, all the way to the specialty stores of Beijing and mainland China; While negotiations are underway for duty-free access to China, the key problems are a serious lack oftransparency of the applicable Chinese rules and procedures.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT143