Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010More importantly perhaps, the value of preferences has been reduced as the margins between the preferentialtariffs and the Most Favoured Nations (MFN) tariffs, which apply to all other partners in preference givingcountries, especially those countries whose exporters are most likely to compete directly with Nepaleseproducers, have been eroding, as suggested in table 1.10. If anything, the ongoing WTO negotiations underthe Doha Development Round, popularly known as the Non-Agricultural Market Access (NAMA), and aimed atreducing tariffs on goods other than agricultural commodities will further accelerate the trend.In sum, while preferential market access may remain important to Nepal’s exporters in a few sectors, suchaccess is shrinking and it is high time for Nepalese policymakers and exporters to recognize the rapidlydecreasing value of preferences as an instrument of competitiveness, as further trade liberalization takesplace, both unilaterally and multilaterally.1.8 RecommendationsDuring the year 2000s, Nepal has achieved already some degree of product-mix diversification. The challengesfor further expanding Nepal’s export growth might be more about diversifying its exports by (i) expandingthe range of markets into which existing products are sold (geographical diversification); (ii) value chainupgrading of existing products, including agricultural exports; and (iii) taking advantage of opportunities toexpand exports of services, including labour services.Where growth in demand from developed economies used to be the main driver of LDC exports during the1990s, increasingly it is the new and dynamic markets of South and Central American, Asian, Gulf and Africancountries where new opportunities lay. Nepal’s proximity to large and most rapidly growing economies inthe world--China and India--offers opportunities for expanding Nepal’s export trade. The Government needsto focus on supporting exporters’ efforts to enter new destination markets for goods and services, includingproviding improved market intelligence to them and meeting NTBs.The Government should undertake measures to improve accessibility of Nepalese goods export markets inthe areas of NTBs. There is a need to build up domestic capacity that can help exporters meet NTBs. Thismay include strengthening related infrastructure and creating awareness of NTBs among exporters, includingbuilding up agriculture extension services, with a view to meeting SPS requirements.Remittances by the Nepalese workforce employed overseas will remain an important source of income andeconomic growth. Considerable untapped potential remains to increase and better harness remittancethrough policy support. Investments in education, complemented by better vocational training, could serveto raise earnings of Nepalese migrants be inducing demand in higher skill jobs. Government support throughstreamlined procedures at home and active search for destinations abroad could facilitate large labourmigration. While a formal memorandum of understanding has been signed with Malaysia, Hong Kong andRepublic of Korea, Nepal needs to extend employment-seeking talks with other countries as well. Efforts couldalso be made to reduce transaction costs for migrants by more effective regulations of manpower agenciesand improving access to finance from the formal financial system. The central bank should continue to workwith the Nepalese private sector to further develop systems for more efficient collection and repatriationof remittances through formal channels that both reduce risks for migrants and help deepen the financialsystem. Mechanisms need to be devised to improve the utilization of skills acquired by returning migrants andto put a large share of the remittances to use for investment and employment creation in Nepal itself.Nepal should also negotiate to obtain commitment on market access and national treatment in all servicesectors and modes of supply interest to the country, in particular labour export services to developed anddeveloping countries. Since the present movement of natural persons is biased against semi-skilled andunskilled work, which forms the major category of labour service export from the country, Nepal should18NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT