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N T I S2010Although all of the indicators are important for creating a climate conducive to investment, the ‘EmployingWorkers’ and ‘Trading across Borders’ indicators seem those needing most urgent attention when consideringNepal’s poor global ranking in these two areas and their role in promoting trade and investment.Employing WorkersThe difficulties that employers face in hiring and firing workers are shown in Table 5.3. The table highlightsthe results for Nepal in 2010 relative to its neighbours and OECD average. Each index assigns values between0 and 100, with higher values representing more rigid regulations. The overall Rigidity of Employment Indexis an average of these indices.Table 5.3Employing Workers Indicators: Nepal, South Asia, OECD Average, 2010Indicator Nepal South Asia OECD AverageDiffi culty of hiring index (0-100) 67 27.8 26.5Rigidity of hours index (0-100) NA 10.0 30.1Diffi culty of redundancy index (0-100) 70 41.3 22.6Rigidity of employment index (0-100) 46 26.3 26.4Redundancy costs (weeks of salary) 90 75.8 26.6Source: World Bank Doing Business Nepal 2010.The table confirms the feedback received from investors who identified the existing labour regime as a majorand critical constraint to investment. In particular, hiring and firing regulations and labour unrest are stranglingprivate sector growth across all sectors and are key factors undermining Nepal’s short-term prospects foreconomic growth.Trading Across BordersThis other key area of reform that is key to promoting an investment-friendly climate is discussed in moredetail in Chapter 6.Institutional and Policy-level Constraints on Investments in NepalGovernment institutions can play an important role in promoting and facilitating investment and trade,including promoting and implementing business-friendly policies. A dedicated investment promotionintermediary (IPI) or Board of Investment (BoI) can play a critical role as a key interlocutor between the privateand public sectors by providing one-stop service to investors, by signaling and advocating investment climateimprovement based on investor feedback, and by addressing existing market failures, including marketingof investment opportunities and the provision of adequate information on the investment climate. Withoutactive promotion, a small country like Nepal, located between two major investment destinations (India andChina), is unlikely to attract the attention of as many potential investors as it would like. In fact, most foreignfirms will not be aware of the investment opportunities in Nepal unless Nepal embarks on a serious effort topromote investment opportunities in the country underpinned by attractive policies and effective institutionalarrangements.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT153
N T I S2010Apart from the critical macro-level investment climate constraints mentioned earlier, there are threeinstitutional barriers to effective promotion of investment and trade in Nepal that will need to be addressedin the short term. These are:1. The absence of an institution with a mandate to promote Nepal for investment;2. The lack of a national strategic plan for investment promotion; and3. The very limited capacity in the Government to conduct investment promotion.A Dedicated Institution for Investment PromotionCurrently, Nepal has neither a national IPI nor any department within the Government engaged in the activepromotion of Nepal as a destination for investment. There is no institution undertaking investment promotionto complement some of the destination promotion or product promotion efforts undertaken respectively bythe Nepal Tourism Board and the Trade and Export Promotion Centre.The Department of Industries (DoI) is the current focal point for foreign investment and sole agencyresponsible for administration of the Foreign Investment and Technology Transfer Act. ‘Promoting foreigninvestment in all categories of industries’ is mentioned as a function of DoI, but, in reality, its activities are ofan administrative nature. No pro-active image building or investor targeting is undertaken by the DoI. Apexprivate sector associations and Chambers of Commerce, including CNI and FNCCI, engage in some investmentpromotion activities with respect to their members seeking investment and trade opportunities, but this workhas been hampered by the difficulties in Nepal’s investment climate and their limited capacity. As it stands,there is little evidence of new foreign investments in the country and anecdotal information actually suggestsdisinvestment taking place among foreign companies.Successful investment promotion programmes and institutions in other countries around the world oftendemonstrate capabilities and professional services in the following areas:1. Image-building: creating the image of a country as an attractive site for international investment;2. Investment Generation: targeting specific sectors and companies with a view to creating new investmentleads and proposals;3. Investor Facilitation and Servicing: assisting an investor in preparing an investment decision, starting upits new operations, and maintaining it in good standing;4. Investor Aftercare: managing relationships with existing investors;5. Policy Advocacy: improving the quality of the investment climate and identifying the views of theprivate sector on that matter.Currently, a formal approach to most of the elements listed above is missing in Nepal, though some limitedefforts exist in the area of investor facilitation and policy advocacy. In the area of advocacy, CNI and FNCCIare in regular contact with the government on policy issues. On the investment facilitation and servicing side,the Foreign Investment Section and the Industrial Facilitation Section of the DoI do fulfill some functions on anad hoc basis, including providing assistance to investors in the processing of investment approval, registrationand application for work permits, visas and the reimbursement of import/export duties. But this is essentiallya facilitation and recommendatory role as the final approval authority for all of these lies with other ministries.There are also a few private sector firms that offer some elements of investor services.The lack of a formal approach to investment promotion and absence of a single institution dedicated to thisimportant activity is visible in Nepal’s latest score on the bi-annual global investment promotion benchmarkingsurvey conducted by the World Bank Group, the Global Investment Promotion Benchmarking (GIPB) Survey2009.154NEPAL 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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N T I S2010Market Access Conditions
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N T I S2010Gender Impact: The respo
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N T I S2010Information from industr
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N T I S2010Cost and Quality of Infr
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N T I S2010RankCountryTable 2.26Att
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N T I S2010# Botanical Name 41 Spec
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N T I S2010Current Export Destinati
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N T I S2010significant attention fr
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N T I S20109) Silver JewelryBackgro
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N T I S2010Availability and Quality
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N T I S2010Attractive Markets for S
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N T I S2010Production Capacity: Nep
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N T I S2010ii.iii.required for the
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N T I S201012345678910# Name of Ste
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N T I S2010Export Prospect: Accordi
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N T I S2010Gender Impact: Female wo
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N T I S2010The value added of those
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N T I S2010sheep population, which
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N T I S201013) TourismBackgroundTou
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N T I S2010Index 2: World Market Co
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N T I S2010There are also about 24
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N T I S2010Index 1: Export Performa
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N T I S2010Index 2: World Market Co
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N T I S2010Contribution to Skill De
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N T I S2010Types of Exported Servic
Page 116 and 117: N T I S2010Cost and Quality of Infr
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
Page 148 and 149: N T I S2010India’s view is that t
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: N T I S2010Lack of up-to-date polic
Page 169 and 170: N T I S2010capabilities in all five
Page 171 and 172: N T I S20105.5. Combining Investmen
Page 174 and 175: Chapter 6Trade FacilitationN T I S2
Page 176 and 177: N T I S2010In the 2005 Trade Facili
Page 178 and 179: N T I S2010The latest phase of impl
Page 180: N T I S2010improve efficiency. Few
Page 183 and 184: N T I S2010Figure 7.1Future Organog
Page 185 and 186: N T I S2010EU countries, special pr
Page 187 and 188: N T I S2010Act 1980. So far, 130 fi
Page 189 and 190: N T I S2010The current projects inc
Page 191 and 192: N T I S2010The NBSM as a secretaria
Page 193 and 194: N T I S2010Many more organizations
Page 195 and 196: N T I S2010Table 7.8Existing Nepal
Page 197 and 198: Table 7.9Standards Issues for Ten E
Page 199 and 200: N T I S20107.14 Priority Actions an
Page 201 and 202: N T I S2010It is not clear what amo
Page 203 and 204: N T I S2010GeneralNepal’s general
Page 205 and 206: N T I S2010a crucial part of the PR
Page 207 and 208: N T I S2010residue limits (MRLs) ar
Page 209 and 210: N T I S2010The viral diseases chirk
Page 211 and 212: N T I S2010SPS issues Affecting Tra
Page 213 and 214: N T I S2010Indian phytosanitary sta
Page 215 and 216: 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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