Non-domestic goods dominate Nepal’s exports as high-value products struggle

Nepal's export sector is showing a concerning trend, with high-value goods experiencing minimal growth while overall exports surge, largely fueled by re-exported edible oil. Last fiscal year, exports of products identified under the Nepal Trade Integrated Strategy (NTIS) 2023 grew by a mere 3.16 percent, reaching Rs104.62 billion, a stark contrast to the overall export growth of 13.81 percent during the same period.

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Despite a good concept and policy, the goods listed in NTIS have not been able to grow as expected mainly due to lack of coordination.

The NTIS initiative, designed to boost exports and aid Nepal's graduation from least developed country status, has struggled to achieve its goals. Despite identifying products with high export potential, many have underperformed. Industry representatives attribute this to a lack of coordination among government agencies, frequent policy shifts, bureaucratic changes, and political instability, which collectively discourage investment and productivity in these key sectors.

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The government is preparing industrial development policies and that reforms to some legal provisions could help increase productivity, particularly under a stable government.

Much of Nepal's export revenue increase comes from the re-export of edible oil. Nepali traders import crude oil and process it for re-export to India, benefiting from tariff concessions under the South Asian Free Trade Area. This reliance on processed imports highlights a weakness in domestic production capabilities.

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The share of GDP from manufacturing is declining and it needs to be reversed.

Private sector representatives, like Birendra Raj Pandey, president of the Confederation of Nepalese Industries, emphasize the need for production- and industry-focused policies and legal reforms to enhance productivity. Pandey notes that while the NTIS concept is sound, implementation falters due to poor coordination. He also points out the declining share of manufacturing in GDP, which needs reversal through increased capital spending and investment. Traditional NTIS-listed products such as carpets, tea, iron and steel, cement, handmade paper, and spices have seen their exports decline, indicating a stagnation in production methods and market diversification.

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We need to produce goods that have a competitive advantage compared to our neighbouring countries.