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N T I S2010Cost and Quality of Infrastructure: High costs of electricity and fuel are major problems, as are thetransportation facilities used for carrying tea leaf from farm to processing unit are bad, which are negativelyaffecting the quality of product.Efficiency of Domestic Supporting Industries: All required inputs are easily and abundantly available. Manypeople are even complaining of indiscriminate and overuse of inputs. The production of tea leaf far exceedsthe processing capacity of the existing factories, and farmers are selling their leaf to Indian factories acrossthe border.Domestic Demand: No industrial uses of tea were reported. However, there are a number of tea blenders whoare diversifying their activities, resulting in a very high demand for processed tea.Business Environment: The overall business environment is considered as average. But export is made costlydue to lack of certification and test reports on the products from accredited laboratories or authorities. Oneissue that has been raised in the past about the Nepalese sector is the lack of an auction system for tea,which would allow international buyers to source tea direct from one source. Tea from different small-scaleproducers could be graded, increasing the transparency for buyers who prefer to source from one place onlyrather than from a variety of small-scale producers.Government Initiatives and Donor Involvement: There are several government-backed authorities, privateassociations, and international donors assisting the tea sector. The government grants a number of incentivesand assistance to the tea industry like exemption of land ceiling; exemption of 75 per cent of land registrationfee and land revenue; leasing of public land for up to 50 years for tea cultivation; priority lending; low interestrates for land consolidation; free technical service to small and cooperative tea farming; capital grants forirrigation; establishment of research and training centres in collaboration with the private sector; incentivesto ancillary industries, and some export promotion activity support.HIMCOOP has been formed to provide a one-stop agency for tea sales. It is funded by SNV and its marketingstrategy has been structured with the assistance of GTZ and WINROCK International. Efforts are made tobrand Nepalese tea in the international market as ‘Quality from the Himalayas’. HOTPA is also implementing,in cooperation with several donor agencies, a code that will bring the sector up to international standards.This includes the introduction of environmentally friendly and socially accountable practices.Prospect for Domestic Supply Conditions: Tea cultivation has been extended to different districts from Jhapain the Terai to Ilam, Panchthar, Dhankuta, Terhathum, Sankhuwasabha, Bhojpur, Dolakha, Ramechhap,Solukhumbu, Sindhupalchowk, Nuwakot, and Kaski in western Nepal. Production has increased very fastand more promising as most plantations are still young and yet to start yielding harvest, which suggests thatproduction is set to increase even further. There is a large potential to expand the cultivated area, butadditional processing facilities will be required to help increase Nepal’s tea export. Organic certification andhigh quality teas are the further differentiating factors.Index 4: Socio-economic ImpactCurrent Employment and Job-Creation Prospect: The job creation impact of this sector is very high comparedto other sectors. This sector seems to be a strong engine for farmers’ income generation and poverty reductionas orthodox tea gives higher returns compared to other crops. This sector is also likely to have a high impacton total employment compared to other sectors, especially female employment, as estimates suggest that italready accounts for around 100,000 people (ITC, 2007a).The FTEE is high for this sector. Over 30,000 people are directly involved in the industry, with a large percentagebeing rural women.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT49
N T I S2010Gender Impact: Women constitute a large percentage of total labour involved in this sector, although this ismainly in low-skill work, such as leaf picking. Their overall share is estimated at 60 per cent (Thapa, 2005).Contribution to Skill Development: Most of the workers are trained and/or have gained experience in Indiantea estates. The establishment of a tea technical school in Nepal is still under consideration.Impact on Development of Disadvantaged RegionsStakeholders agree that tea production has a positive effect on disadvantaged regions.Energy and Water Constraints: Energy and water uses are average. Tea bushes do not require high irrigation,and the seasonal monsoon rains provide the required amounts sufficient for the season unless in very adverseperiods.Environmental Impact: The land use is better for tea as the undulating terrain and barren areas can be useddue to the hardy and deep roots of the bushes, able to bind the soil and stop erosion. However, indiscriminateand high use of pesticides and insecticides and incorrect application cycles, mainly in the orthodox tea areas,where the insect and pest presence is very high due to the dampness in the atmosphere, have caused the finalproduct to contain more than the maximum level of residues permitted.Market Attractiveness IndexAlmost all of Nepal’s tea is exported to India. Attractive markets for direct export appear to be Egypt, UAE,Russia, USA, and UK. These markets are relatively large and fast-growing. No significant tariff advantages existin major markets other than India, but Pakistan is granting a duty-free quota of 10,000 MT/year to SAPTALDCs.RankCountryExports Nepal World market(2008) shareTable 2.18Attractive Markets for TeaAttractive markets for Tea (HS 0902.40)Top 10 - Weighted Market Attractiveness IndexGrowth rate(2004-2008)Tariff forNepalTariffadvantageMain competitors1 Egypt 0 7.3% 200.3% 2% -2% Kenya, India, Indonesia2 UAE 0 7.0% 24.7% 0% 0% Sri Lanka, India, Kenya3 Russia 0 11.7% 19.9% 0% 0% Sri Lanka, India, Kenya4 USA 11 6.2% 11.2% 0% 0% Argentina, Germany, China5 UK 0 11.8% 5.4% 0% 0% Kenya, India, Tanzania6 Iran 0 6.3% 20.9% 30% 0% Sri Lanka, India, Kenya7 Pakistan 31 8.4% 3.5% 10% 0% Kenya, India, Bangladesh8 Germany 239 4.0% 8.5% 0% 0% India, Sri Lanka, Indonesia9 Kazakhstan 0 2.8% 19.1% 0% 0% Kenya, India, Sri Lanka10 Australia 0 1.3% 33.8% 0% 0% India, Indonesia, Sri Lanka50NEPAL 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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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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