Ministry of Commerce And Supplies - Enhanced Integrated ...

Chapter 10Barriers to Service TradeN T I S201010.1 IntroductionUnlike products, which are tangible, services are more difficult to define. Similarly, unlike trade in goods,there is no internationally recognized code to track and measure services as they are exported.In general, the measurement of both output and trade in services is inherently more difficult than that ofgoods. They assume reaching common definitions of service output with data providers and depend oninformation that may be obtained from business accounting and record-keeping systems, from individualsand from a variety of data sources, including administrative sources, surveys, and estimation techniques.Nepal’s national accounting system is based on the System of National Accounting (SNA) 1993. 1 Under thissystem, the service sector contributed over 51 per cent of GDP in 2007/08. The share of service sector intotal employment was 21.4 per cent in 2007. And, of all sectors open to foreign investment (1,743) by DoIas of March 2009, services, including tourism, attracted 54 per cent. In international trade, the exports ofservices were higher than imports until FY 2003/04, though the situation deteriorated afterwards. The currentdefinition of services by the GoN, however, includes only the tertiary sector and so does not include trade inModes 3 and 4 under the GATS classification.10.2 Trade in ServicesNotwithstanding the measurement issues, and as discussed in Chapter 1, the contribution of trade in servicesto Nepal’s BoP can be seen either as contributing to the trade deficit or to a trade surplus, depending onwhether one excludes or includes the contribution of Mode 4 services. If one uses the conventional, butnarrow, BoP definition of service credits and debits (excludes Mode 4), Nepal experienced a service tradesurplus in the first half of the 2000s, followed by a service trade deficit in the second half of the decade.However, using an expanded definition of trade in services and including remittances, then trade in servicesshowed a growing surplus throughout the years 2000s, as shown in Table 10.1.Table 10.1Nepal’s Trade in Services Balance, 2000/01-2007/08 (in Rs. Million)Fiscal Year2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08Service Credits 29,821.7 23,508.2 26,518.9 34,315.9 26,001.9 26,469.7 32,078.9 42,236.1Service Debits -20,519.4 -19,569.8 -19,469.2 -25,241.0 -28,036.1 -33,288.0 -40,456.2 -53,629.5Net Remittances 47,216.1 47,536.3 54,203.3 58,587.6 65,541.2 97,688.5 100,144.8 142,682.7Net Service Trade Balance,excluding Remittances9,302.3 3,938.4 7,049.7 9,074.9 -2,034.2 -6,818.3 -8,377.3 -11,393.4Net Service Trade Balanceincluding Remittances56,518.4 51,474.7 61,253.0 67,662.5 63,507.0 90,870.2 91,767.5 131,289.3CreditsTravel 11,717.0 8654.3 11,747.7 18,147.4 10,463.8 9,555.8 10,125.3 18,653.1Government Services 7,614.2 8,894.5 6,624.0 7,143.9 6,804.9 7,441.5 12,336.4 13,301.8Other Services 10,490.5 5,959.4 8,147.2 9,024.6 8,733.2 9,472.4 9,617.2 10,281.2DebitsTransportation -9,308.7 -8,854.4 -8,618.4 -9,382.1 -10,602.2 -12,592.3 -14,557.4 -22,969.2Travel -5,520.4 -5,731.1 -6,171.5 -10,021.5 -9,691.9 -11,960.8 -15,785.0 -20,862.0Other Services -5,690.3 -4,984.3 -4,679.3 -5,837.4 -7,742.0 -8,734.9 -10,113.8 -9,798.3Source: Nepal Rastra Bank, Annual Report, Various Years1Under SNA 1993, economic activities are classified under 15 sectors. In turn, the 15 sectors are organized into three broad groupings: primary,secondary, and tertiary. The primary sector includes agriculture and forestry, fisheries, and mining and quarrying; the secondary sector includesmanufacturing, electricity, gas, and water, and construction; and the tertiary sector includes the nine services sectors , namely wholesaleand retail trade; hotels and restaurants, transport, storage and communications, financial intermediation, real estate, renting and businessactivities, public administration and social security, education, health and social work; and other community, social and personal activities.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT215