Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S20104.7 Recommendations: Challenges and Opportunities ShapingNepal-China TradeThe fieldwork associated with the preparation of this chapter confirms the validity of many of the exportpotentials reviewed in Chapter 2 as far as Nepalese exports to China are concerned. The fieldwork also pointsto challenges, many of which are reviewed in greater depth in other chapters of the report. Medicinal herbs, wheat flour, and handicrafts are the key products currently being exported to China,mainly Tibet. A growing Chinese middle class seems interested in Nepalese wooden handicrafts onreligious ground or for interior decoration. Jewelry also appears to have good potential. Additionalfocus could be placed on export of tea, high value fruits such as apple and orange, tomato, floriculture,red lentil, Basmati rice, ginger, and medicinal herbs and essential oils. However, Nepal needs toincrease volume and quality, including improving SPS compliance and good agricultural practices foragro-food and improving standards compliance, design, branding and merchandising, and packagingfor processed goods; Floriculture, which is a high value export, has high potential. Currently, it is exported mainly to Japanand Gulf countries via air freight, still in relatively small quantities. But there is clearly a lot of potentialfor trade with China (as well as India and other countries); Another potential high value export is horticulture, including strawberries, apple, and orange. Thebiggest hurdle for those is SPS requirements; High mountain mineral water and instant noodles appear to have a significant market potential inChina; TAR and Hong Kong are major destinations for Nepalese exports. The main exports and greatestpotential are in handicrafts, handmade jewelry, and selected agro-food products. Nepal could investto develop products that appeal to consumers in these target markets; With respect to services, the tourism and health services sectors clearly stand out as the two keysectors for development. For example, Tibetans could be attracted to state-of-the-art medical andhealth facilities in good climate conditions. However, these services depend on the existence of theright domestic infrastructure, institutions, and political and economic stability; Nepal was designated as an approved destination for Chinese tourists in 1997-99. Three Chineseairlines serve Nepal. However, the technical shortcomings of Nepal’s infrastructure, including asingle international airport with a single runway, large and high altitude holding patterns that resultin higher fuel consumption, high airline fuel charges, and the inability to fly-in with large aircraft withhigh efficiency and returns, continue to impair the development of the tourism sector. It is currentlycheaper for Chinese tourists to fly to Europe than Nepal; With respect to the promising sector of energy-related services, while hydropower has great potentialsto meet both domestic and export needs, it is a long-term project; There is also significant interest from China in mineral resources. Chinese exploration is underway inNepal, with particular interest in copper, gold, and zinc.The findings of this review of Nepal-China trade challenges and opportunities point to many of the sameissues as those raised in the previous chapters. The issues of supply capacity, standards compliance, tradefacilitation, investment environment are addressed in other chapters.However, this chapter also points to the need for GoN to develop a comprehensive trade negotiations agendaand formal mechanisms to monitor complaints from the business community and develop responses throughmore consistent and focused negotiations with trading partners, especially with a potentially large partnersuch as China. The chapter also points to the need to push forward on incomplete tariff negotiations.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT145