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N T I S2010Export Prospect: According to industry sources, the prospect of further increases in both exports andproduction is widely seen as very positive. Export prospect is basically in line with production prospect asmost of the production is exported.Index 2: World Market ConditionsTable 2.16Total World Export Value of Tea, 2004-2008 (US$1,000)2005 2006 2007 2008 2009 20093,335,023 3,616,503 3,889,756 4,248,759 5,408,830 n/aWorld tea exports have grown annually by 12 per cent in recent years, with a slight nominal upward trend inaverage unit values.Market Access Conditions (Tariffs and NTBs): Overall, Nepal has favourable market access to most marketsbut few tariff advantages, with the main exception being the Indian market. India applies a 100 per cent MFNtariff on tea. Many major importers have zero MFN rates for tea, 18 so there is no advantage for Nepal. Thisincludes major importers such as EU, USA, Oman, and UAE. Russia applies a 20 per cent tariff and grantsduty-free access to Nepal, and similarly does Japan. These could, therefore, be interesting markets for directexports. Pakistan, one of the largest importers in the world, grants a 10,000 MT duty-free quota for SAPTALDCs (of which only Nepal and Bangladesh export tea).Major Competitors in World Market: Sri Lanka and Kenya are the main competitors in Nepal’s current orpotential export destinations, followed by China and India. Pakistan, for example, imports 63 per cent of itstea from Kenya alone.World Market Prospect: Overall, world market prospect is positive. World market prices for tea are volatile,but have shown an upward trend in recent years, except for a temporary but significant fall during the globaleconomic crisis in 2008/09. By the end of 2009 prices have reached their highest level since the mid 1980s.The World Bank forecasts a positive trend in prices in the long-term, partly due to increasing demand fromIndia.Figure 2.3 Tea Prices on World MarketsSource: World Bank, Global Economic Prospects 2009 (Commodity markets briefs)18Tariffs refer to black tea only.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT47
N T I S2010Index 3: Domestic Supply ConditionsProducers: There are reportedly a total of 12,200 smallholder plots, 19 31 cooperative societies, 134 mediumsizedgardens (57 are CTC tea estates), and 38 large plantations. There are 40 tea processing units of differentsizes. There are 28 units having both tea estates and processing units and about 20 tea packers, exporters,and importers in the country.Production Capacity: The sector is concentrated in five districts in eastern Nepal. The last decade or so hasseen a tremendous growth in the Nepalese tea industry with the plantation area expanding from 3,502 ha in1996/97 to 16,594 ha in 2007/08. This increase in plantation area has been matched by an increase in theoutput of tea: 2,900 MT in 1996/97 to 16,100 MT in 2007/08. Of this, 85 per cent was CTC and 15 per cent wasorthodox type. Production is concentrated in a number of fragmented areas such as private gardens, smallfarmers’ plantations, and factories. Consequently, marketing efforts are also disjointed. For instance, Nepal’stea factories are supplied by over 12,200 producer farmers.YearTable 2.17Acreage and Production of TeaArea (ha)Production(Million kg).Yield(kg./ha)2003/04 15,012 1.17 7762004/05 15,900 1.26 7932005/06 16,012 1.37 8552006/07 16,420 1.52 9242007/08 16,594 1.61 972Quality of Product: All the stakeholders of tea value chain reported that quality of Nepal tea was high andexpected it to improve further in future, but pesticide residues has been a problem in recent years.Productivity: In 2007/08, the overall average yield of CTC tea plantations was 972 kg/ha, while it was only274 kg/ha for orthodox type. The productivity per unit of land area is steadily increasing over the years. Theorthodox tea yield in Nepal is about 25 per cent less than India and 30 per cent less than Sri Lanka. In the caseof CTC the yield is less than that of Kenya.Availability and Quality of Labour Force: There is scarcity of skilled personnel and expertise in the tea sector,partly due to a lack of formal training institutions.Labour Cost and Overall Production Cost: Production costs--leaf production and processing--on the averageare comparable to the competitors. Labour costs were reported to be around US$1.50-2 for tea pluckers in2007, but depend on the amount plucked (ITC, 2007d). However, these costs apparently have since risen andindustry sources complained about, in their view, excessive wage demands from unions and have thereforerated overall labour costs as ‘high’.Level of Processing Technology: The technologies used in tea production and processing are of averagestandard. The past efforts of all stakeholders have helped increase the production of green leaf of smallfarmers, cooperatives, and tea estates. But the processing capacity has not developed to cope with theincreased production of green leaf.19NTCDB indicates a total of 7,791 smallholder farmers. However, data collected from associations/chambers/and INGO/NGO’s suggests that atotal of 12,200 smallholder farmers are active.48NEPAL 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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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
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N T I S2010Cost and Quality of Infr
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N T I S201016) Health ServicesBackg
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N T I S2010medical services are bei
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N T I S201017) Education ServicesBa
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N T I S2010should be interpreted ca
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N T I S2010foreign students. The me
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N T I S2010Under mode 4 (presence o
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N T I S2010Index 4: Socio-economic
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N T I S2010generate revenue of US$3
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N T I S2010monopsony power. Several
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N T I S2010The possibility of direc
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N T I S2010Dairy Products, specific
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Chapter 3Access to the Indian Marke
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N T I S2010The Nepal-India Trade Tr
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N T I S2010Most issues reported abo
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N T I S2010Nepalese Domestic Issues
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N T I S2010India’s view is that t
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Chapter 4Access to the Chinese Mark
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N T I S2010products must be wholly
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N T I S2010The findings discussed h
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N T I S20104.5 Other Impediments to
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N T I S20104.7 Recommendations: Cha
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N T I S2010inflow between 2000 and
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N T I S2010Industrial Parks and SEZ
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N T I S2010Lack of up-to-date polic
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N T I S2010Apart from the critical
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N T I S2010capabilities in all five
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N T I S20105.5. Combining Investmen
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Chapter 6Trade FacilitationN T I S2
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N T I S2010In the 2005 Trade Facili
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N T I S2010The latest phase of impl
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N T I S2010improve efficiency. Few
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N T I S2010Figure 7.1Future Organog
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N T I S2010EU countries, special pr
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N T I S2010Act 1980. So far, 130 fi
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N T I S2010The current projects inc
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N T I S2010The NBSM as a secretaria
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N T I S2010Many more organizations
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N T I S2010Table 7.8Existing Nepal
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Table 7.9Standards Issues for Ten E
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N T I S20107.14 Priority Actions an
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N T I S2010It is not clear what amo
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N T I S2010GeneralNepal’s general
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N T I S2010a crucial part of the PR
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N T I S2010residue limits (MRLs) ar
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N T I S2010The viral diseases chirk
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N T I S2010SPS issues Affecting Tra
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N T I S2010Indian phytosanitary sta
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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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