Nepal’s exports to South Asia are far behind its potential, and they can be increased fourfold if manmade barriers to trade—tariff and non-tariff—are removed, said a new report from the World Bank. Currently, shipments to South Asian countries are valued at $0.5 billion, and they can be boosted to $2.1 billion if the hindrances holding back intraregional trade are addressed by the countries in the region.

Most of Nepal’s exports are to South Asian countries, and it has a trade deficit of $10.8 billion which is equivalent to 37 percent of its gross domestic product. “Situated in the world’s fastest growing region, Nepal’s potential to expand trade in goods and services is promising,”

said Faris Hadad-Zervos, World Bank country manager for Nepal.

“Addressing its own protectionist policies will help Nepal significantly increase its exports not only in South Asia, but also to the rest of the world.”

Intraregional trade in South Asia can grow from its current value of $23 billion to $67 billion, according to a report entitled A Glass Half Full: The Promise of Regional Trade in South Asia which was released on Friday. Intraregional trade in South Asia remains one of the lowest in the world, and accounts for about 5 percent of the region’s total trade, compared with 50 percent in East Asia and the Pacific, the report said.

The report also assesses the gap between current and potential trade in South Asia, and provides a roadmap for deepening regional trade. It identifies four critical barriers to regional trade—tariffs and para tariffs, real and perceived nontariff barriers, connectivity costs and a broader trust deficit among the countries.

South Asian countries impose greater trade barriers for imports from within the region than from the rest of the world. More than one-third of intraregional trade falls under sensitive lists, which are goods that are not offered concessional tariffs under the South Asian Free Trade Area (SAFTA).

The report said that more than 36 percent of Nepal’s imports from South Asia are under sensitive lists, more than any other country in the region.

It suggested targeting sensitive lists and para tariffs to enable real progress on SAFTA, and called for a multi-pronged effort to address non-tariff barriers, focusing on information flows, procedures and infrastructure.

The World Bank report identified connectivity as the key enabler for robust regional cooperation in South Asia, saying that poor land and air connectivity was preventing South Asian countries from reaping the benefits of shared borders.

“There are no flights between Nepal and Sri Lanka, the Maldives or Afghanistan, and only one flight per week between Nepal and Pakistan,” said Sanjay Kathuraia,

the World Bank lead economist and the lead author of the report.

“Lack of connectivity is a key contributor to the high cost of trade between Nepal and South Asia, and improving connectivity will take Nepal a long way.”