The country’s exports declined by 4.8 percent to Rs77.83 billion in the first 11 months of the last fiscal year, according to a Nepal Rastra Bank (NRB) report .
Nepal had exported goods worth Rs81.73 billion in the same period a year ago.
Although the import growth slowed, especially after the April 25 earthquake, the imports were still 11 times higher than the exports.
The struggle to boost the exports is evident with the fact that the government kept the export target unchanged in both 12th and 13th three-year plans at Rs 100 billion. The 13th plan ends at the end of the current fiscal year.
Although the 13th plan targeted to maintain the trade deficit at 20 percent of the gross domestic product (GDP), it stood at 32 percent as of the last fiscal year, according to the Commerce Ministry.
And, the situation does not seem improving. “The biggest problem is the lack of necessary infrastructure like energy and roads and labour-related issues that increase the cost of production, making Nepali products uncompetitive,” said Purusottam Ojha, former commerce secretary. “The government too does not have a comprehensive export promotion strategy.”
Being a landlocked country, the transportation costs for Nepal is also higher compared to other South Asian nations.
“Despite the higher costs of production, the government offers us relatively lower cash incentives compared to neighbouring countries like India and Bangladesh,” said Indra Bhakta Manandhar, second vice-president of the Central Carpet Industries Association.
Under the present cash incentive scheme, traders exporting goods to countries other than India get up to 2 percent of the value of the products as an incentive.
Manandhar said the cash subsidy does not make a big difference in the costs. “The Nepali carpet industry withstood the slump of demand in Germany, traditionally the largest market, not because of the government’s support, but because the market diversification to the US and Australia,” said Manandhar.
Carpet is one of Nepal’s biggest exportable products, but the exports dropped by 5.7 percent to Rs6.15 billion as of the 11th month of the last fiscal, according to the NRB.
The government does not offer incentives to those exporting goods to India, although it accounts for two-thirds of total exports.
“If the government genuinely wants to boost the exports, incentives to the traders exporting goods to India is a must. However, the loopholes that give space for the misuse of such a facility must be closed first,” said Ojha.
In fact, Nepal’s overall exports in the last fiscal year suffered particularly due to a decrease in exports to the southern neighbour.
According to the NRB report, exports to India decreased by 6.3 percent as of the 11th of the last fiscal. Exports to India decreased mainly due to a fall in the exports of zinc sheets, textiles, cardamom and tooth paste, among others.
Most of the jute industries in the Eastern Region, including the Biratnagar Jute Mill, have closed down after the government scrapped the electricity subsidy being offered to them.
The government has identified 19 products and services, mostly agriculture items, that have high export potential under Nepal Trade Integration Strategy (NTIS), the performance of the most of the items is disappointing. And, the government is preparing to revise the list. “Promotion of the NTIS products helps in inclusive economic growth, but traditional export items such as garment, carpets, iron rods and cements must also be promoted boost exports notably,” said Ojha.
Exporters have expressed disappointment over the budget for this fiscal year, stating it did not introduce any specific measures to address dwindling exports. The budget has continued the cash incentive system and has promised 100 percent subsidy for exports above the last year’s target.
“We had demanded the government treat the export sector like agriculture and provide similar incentives,” said Ashok Kumar Agrawal, general secretary of the Garment Association of Nepal.
“But disappointingly, the budget didn’t introduce any specific measures,” he added.
He complained the exporters were failing to get adequate subsidised loans although the Nepal Rastra Bank has provisioned refinancing at just 1 percent, which the exporters can get at 4 percent from banks. NRB said exporters received a total of Rs2.93 billion in export refinance.
The exporters have also complained about a growing shortage of skilled workers. “Due to the migration of the workers for foreign employment, we are not getting enough skilled workers,” said Agrawal.