Trade with SAsia at crawling speed despite Safta

- RAJESH KHANAL, Kathmandu
Trade with SAsia at crawling speed despite Safta

Sep 30, 2014-

Nepal’s trade with its neighbours in South Asia is still at crawling speed even though it has been eight and a half years since Safta (South Asia Free Trade Area) was launched. The trade accord, which was expected to boost intra-regional commerce, went into effect on January 1, 2006.

Nepal’s trade with other South Asian countries except India barely registers on the scale. India accounted for 93.9 percent of Nepal’s total exports to South Asia and 99.4 percent of the total imports from the region in the last fiscal year 2013-14.

Nepal exported goods worth Rs 59.45 billion to India while its total exports to the region stood at Rs 63.31 billion. Likewise, Nepal imported goods worth Rs 482.34 billion from the southern neighbour compared to imports of Rs 485.46 billion from the rest of the region. According to the Trade and Export Promotion Centre (TEPC), Nepal’s exports to other countries range from 0-3.4 percent of the total exports to the region while imports range from 0-0.4 percent.

Nepal shipped goods worth Rs 5 million to the Maldives while its exports to Sri Lanka were valued at Rs 2.5 million which is 0 percent in terms of market share. Likewise, imports from the Maldives amounted to Rs 12,000 and imports from Afghanistan amounted to Rs 787,000 in the last fiscal year which represents zero market share.

Surprisingly, Afghanistan is the third largest export destination for Nepali goods after India and Bangladesh with the war-torn country accounting for 2.4 percent of the total exports to South Asia. Nepal shipped Rs 1.52 billion worth of merchandise to Afghanistan with chewing tobacco accounting for Rs 1.51 billion of the total exports. A TEPC official said that many chewing tobacco factories moved to Nepal after India banned its manufacture, and they kept exporting the products to Afghanistan as before.

Former commerce secretary Purusottam Ojha said that Nepal failed to export goods to other South Asian countries as a majority of Nepal’s export goods were in their sensitive list. “A majority of Nepali export goods are agricultural products which are in the sensitive list except in India,” he added.

India has put only Nepal’s perfume, tobacco and alcohol products in the sensitive list while the rest of the products enjoy duty free access.

With a large number of goods in the sensitive list and the prospects for growth of regional trade being small as a result, Saarc member countries have promised to shorten the list by 95 percent by 2020 to increase intra-regional trade.

During the eighth meeting of the Safta Ministerial Council held in Thimpu, Bhutan in July, they reached an understanding to slash the sensitive list on a big scale. Currently, the Maldives and Bhutan have the lowest number of goods in their sensitive list, 154 and 156 products respectively.

Similarly, India has the lowest number of goods in the sensitive list for the least developed countries (25). But for other countries in the region, the list contains 614 products. Nepal has 998 goods in the sensitive list for the least developed countries of the region and 1,036 for the rest.

Ojha said that lack of transport connectivity, non-tariff barriers and Nepal’s failure to participate in the manufacturing chain of multinational companies were the other reasons why the country had failed to diversify exports in the region.

“If certain components of the manufactured products were to be made in Nepal, they could be traded across the region which would increase regional trade,” he added.

According to the TEPC, Bangladesh is the second biggest market for Nepali products in the region with lentils being the largest exports. Lentils accounted for Rs 1.96 billion out of the total exports of Rs 2.1 billion to Bangladesh.

Likewise, steel and iron products were Nepal’s largest exports to Bhutan while carpets were the largest exports to the Maldives.

Published: 01-10-2014 08:14

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