RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/NPL/2
10 August 1998
(98-3126)
Working Party on the
Accession of NepalOriginal:  English
ACCESSION OF NEPAL
Memorandum On The Foreign Trade Regime
In a communication dated 5 December 1995 (WT/ACC/NPL/1), the Government of Nepal
applied for accession under Article XII of the Agr eement Establishing the World Trade Organization
(WTO).  Having regard to the Decision adop ted by the General Council on 31 January 1995, the
existing Working Party on the Accession of Nepal to the GATT 1947 continued as a WTO Accession
Working Party with the following terms of referen ce:  "To examine the application of the Government
of Nepal to accede to the World Trade Organization under Article XII, and to submit to the General
Council recommendations which may include a draf t Protocol of Accession".  The membership is
open to all WTO Members indicating their wish to serve on the Working Party.
In accordance with established procedures (WT/ACC/1), the Secretariat is circulating the
Memorandum on the Foreign Trade Regime of Nepal. The Annexes and Tables listed in the
Memorandum are reproduced in document WT/A CC/NPL/2/Add.1.  WTO Members are invited to
submit questions on the Memorandum to the Secretariat, in writing, by 15 October 1998 for
transmission to the authorities of Nepal.
_______________WT/ACC/NPL/2
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TABLE OF CONTENTS
Page No.
I. INTRODUCTION 1
II. ECONOMY, ECONOMIC POLICIES AND FOREIGN TRADE
1. Economy(a) General description (territory population, economic specialization, main
economic indicators)2
(b) Current economic situation 22. Economic Policies
(a) Main directions of the ongoing economic policies, tactical and strategic goals of
the economic policies, pricing policy, economic development plans,privatization plans, sectoral priorities, regional development plans etc.3
(b) Monetary and fiscal policy 5
(c) Foreign exchange, payments system and relations with the IMF, application of
foreign exchange control, if any5
(d) Foreign and domestic investment policy 6
(e) Competition policy 7(f) Privatization policy 7
3. Foreign Trade In Goods and Services
(a) Volume and value of trade 7(b) Export and imports 8(c) Structure of Trade 8(d) Trade by geographic areas and dynamics of trade 9
4. Domestic Trade in Services Including Value and Composition of Foreign
Direct Investment9
5. Information On Financial Movements Related to Nationals Working Abroad
(Remittances)9
6. Information on Growth in Trade in Goods  and Services Over Recent Years and
forecasts for Years to Come.10
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES
AFFECTING FOREIGN TRADE IN GOODS AND TRADE IN SERVICES
1. Power of  the Executive,  Legislative and Judicial Branches of Government(a) General introduction to executive branch of government 10(b) Composition of parliament and legislative branch 11(c) Composition of judiciary and its nature 11
2. Government Entities Responsib le for Making and Implementing Policies
Affecting Foreign Trade12
3. Division of Authority Between Central a nd Sub-Central  Form of  Government 13WT/ACC/NPL/2
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4. Any Legislative Programmes or Plans to Change the Regulatory Régime 135. Laws and Legal Acts 136. Description of Judicial, Arbitral or Administrative Tribunals or
Procedures, If Any
IV. POLICIES AFFECTING TRADE IN GOODS
1. Import Regulation(a) Registration requirements for engaging in importing 14(b) Characteristics of national tariff 15(c) Tariff quotas, tariff exemptions 15(d) Other duties and charges, specifying any charges for services rendered 16(e) Quantitative import rest rictions, including prohibi tions, quotas and licensing
systems16
(f) Licensing procedure 16
(g) Other border measures, e.g. any other schemes that have border effects similar
to those of the measures listed under (e) above16
(h) Customs valuation 17
(i) Other customs formalities 17(j) Pre-shipment inspection 17(k) Application of internal taxes on imports 18(l) Rules of origin 18(m) Anti-dumping régime 18(n) Countervailing duty régime 18(o) Safeguard régime 18
2. Export Regulation
(a) Registration requirements for engaging in exporting 18(b) Customs tariff nomenclature, types of duties, duty rates, weighted averages of
duty rates19
(c) Quantitative export rest rictions, includi ng prohibitions, quot as and licensing
systems19
(d) Export licensing procedure 19
(e) Other measures, e.g. minimum export prices, voluntary export restrictions,
orderly marketing arrangements19
(f) Export financing, subsidy and promotion policies 20
(g) Export performance requirements 21(h) Import duty drawback schemes 21
3. Internal Policy Affecting Foreign Trade in Goods
(a) Industrial policy, including subsidy policies 21(b) Technical regulations and standards, including measures taken at the border
with respect  to imports21
(c) Sanitary and phytosanitary measures, including measures taken with respect to
imports22
(d) Trade-related investment practices 23
(e) State-trading practices 23WT/ACC/NPL/2
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(f) Free zones 24(g) Free economic zones 24(h) Trade-related environmental policies 24(i) Mixing regulations 24(j) Government-mandated counter-trade and barter 24(k) Trade agreements leading to country-specific quotas allocation 24(l) Government procurement practices, including general legal regime and
procedures for tendering, dealing with tenders and award of contracts24
(m) Regulation of  trade in transit 264. Policies Affecting Foreign Trade in Agricultural Products
General Background 27
(a) Imports 27(b) Exports 28(c) Export prohibitions and restrictions 28(d) Export credits, export credit guarantees etc. 28(e) Internal policies 28
5. Policies Affecting Foreign Trade in other Sectors
(a) Textiles régime 29(b) Policies affecting foreign trade in other major sectors 29
V. TRADE-RELATED INTELLECTUAL PROPERTY RÉGIME
1. General Introduction(a) Intellectual property policy 30(b) Responsible agencies for policy formulation and implementation 30(c) Membership in international intellectual property conventions and regional or
bilateral agreements31
(d) Application of national and m.f.n. treatment to foreign nationals 31
(e) Fees and taxes 31
2. Substantive standards of protection, including procedures for the acquisition
and maintenance of intellectual property rights
(a) Copyright and related rights, including rights of performers, producers  of
phonograms and broadcasting organizations31
(b) Trademarks, including service marks 32
(c) Geographical indications, including appellations of origin 33(d) Industrial design 33(e) Patents 33(f) Plant variety protection 33(g) Layout designs of integrated circuits 33(h) Requirements for undisclosed information, including trade secrets and test data 33(i) Any other categories of intellectual property 33
3. Measures to Control Abuse of Intellectual Property Rights 33
4. Enforcement
(a) Civil judicial procedures and remedies 34WT/ACC/NPL/2
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(b) Provisional measures 34(c) Any administrative procedures and remedies 34(d) Any special border measures 35(e) Criminal procedures 35
5. Laws, Decrees, Regulations and Other Legal Acts Relating to the Above 356. Statistical Data on Applications for Grants of Intellectual Property Rights, as
well as any Statistical Data on Their Enforcement35
VI. TRADE-RELATED SERVICES RÉGIME
1. General Introduction 35
2. I.  Business Services
1. Professional Services
(a) Legal services 36(b) Accounting, auditing and bookkeeping services 36(c) Engineering services 37(d) Veterinary services 37
2. Computer and Related Services 373. Real Estate Services 384. Other Business Services 38
(a)  Management consulting services 38(b) Placement and supply services of personnel 38
5. Communication Services
(a) Postal Services 39(b) Courier Services 39(c) Telecommunications services 39(d) Audiovisual services 40
(i) Motion picture production, distribution and 
exhibition40
(ii) Radio and television services 40
6. Construction and Related Engineering Services 417. Distribution Services 418. Financial Services
(a) Insurance 41(b) Banking and other financial services 43
9. Health-related and Social Services(a) Hospital services 44(b) Other human health services 45(c) Social services 4510. Tourism and Travel-Related Services 4611. Transport Services(a) Air transport services 4712. Other Services 47
2. Policies Affecting Trade in Services 47
3. Market Access and National Treatment 48WT/ACC/NPL/2
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(a) Limitations on the number of service suppliers 48(b) Limitations on the total value of service transactions or assets 48(c) Limitations on the total number of service operations or on the total quantity of
service output48
(d) Limitations on the total number of natural persons that may be employed in a
particular service sector48
(e) Restrictions on, or requirements of sp ecific types of legal entity through which
a service may be supplied48
(f) Limitations on the participation of foreign capital 48
(g) Measures providing for less than the treatment accorded to national services or
service suppliers48
4. Most Favoured Nation Treatment 49
VII. INSTITUTIONAL BASIS FOR TRADE AND ECONOMIC RELATIONS
WITH THIRD COUNTRIES
1. Bilateral or Plurilateral Agreements Relating to Foreign Trade in Goods and
Trade in Services49
2. Economic Integration:  Customs Union and Free Trade Area Agreements 49
3. Labour Markets Integration Agreements 494. Multilateral Economic Cooperation, Membership in the Multilateral Economic
Organizations, Trade-Related Programmes of Other Multilateral Organizations.49
LIST OF ANNEXES50WT/ACC/NPL/2
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I. INTRODUCTION
Nepal is one of the least developed countries of the world with per capita income of around
US$20. Eight consecutive periodic development plans starting from 1956 have already been
implemented. Recently, the Eighth Development Plan (1992-97) has ended and the Ninth Five -Year
Plan has been formulated. The stated objectives of the Plan are: sustainable economic growth and
poverty alleviation. The main programmes drawn up for attaining these objectives includeintensification and diversification of agricultural production and agro-processing industries,
development of the energy sector, creation of rural infrastructure, employment generation and
population control.
Macro-economic stabilization has been highlighted in the Ninth Plan to ensure economic
growth with stability. Nepal has embarked on a medium-term, extensive structural adjustment
programme since 1986/87. It aims to move Nepal on to  a higher sustainable growth path by increasing
the participation of the private sector in economic activities, and improving public resourcemanagement. The Government has redirected investment in the social sector for poverty alleviation.
The trade sector has received priority, and in that context Nepal has adopted a liberal trade policy in
order to integrate itself effectively into the international economy , attract foreign investment, make
domestic products competitive internationally, diversify trade, and generate employment.
The trade policy has the following objectives:
(i) to enhance the contributions of trade sector to the national economy by promoting
international trade with the increased participation of the private sector through the
implementation of an open and liberal atmosphere;
(ii) to diversify trade by identifying, developing and producing new exportable products
through promotion of forward and backward linkages for making export tradecompetitive and sustainable;
(iii) to expand trade on a sustained basis through gradual reduction in trade imbalances;
(iv) to promote trade in coordination with other sectors of the economy.
Nepal has taken the following major steps to achieve these objectives:
(i) liberalization of  the trade regime;
(ii) full convertibility of the Nepalese currency (Rupee) in current account transactions;
(iii) easier access for exports of Nepalese industrial products to neighbouring markets;
(iv) export promotion measures.
The foreign trade regime of Nepal in recent years has shifted towards an open and liberal
regime as envisaged in the WTO framework. Nepal is treating all foreign investors on a non-discriminatory basis. Furthermore, Nepal is incr easingly providing national treatment to foreign
companies, thus creating a conducive environment for healthy competition and foreign direct
investment. The need to increase the supply of tradable items, both goods and services, to attract
foreign investment, and to gain better market access conditions for its exports is guiding the current
development policies as well as Nepal’s intention to integrate into the multilateral trading system.WT/ACC/NPL/2
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II ECONOMY, ECONOMIC POLICIES AND FOREIGN TRADE
1. E CONOMY
(a) General description (territory, population , economic specialization, main economic 
indicators)
Nepal is a landlocked country. It is surrounded by India to the east, south and west and by
Tibet, an autonomous region of the People's Republic of China, to the north. The country has arectangular shape and stretches from east to west (latitude of 26.22' to 30.27' and longitude 80.4' to
88.12'). It is largely a mountainous country, as more than 83 per cent of the 147,181 sq. km. of its land
area is either mountains or hills. The mountainous range has most of the highest peaks of the world
including Mt. Everest. The Himalayan range in the north has compelled the country to search for
access to the sea through India. The country has a tropical climate. About 90 per cent of rainfall
occurs during the monsoon (June to September).
The population of the country as of 1996 was estimated to be 21 million, and population
density was 143 persons per sq. km. The population growth rate according to 1996 census is
2.1 per cent.
In Nepal, agriculture accounts for around 41 per cent of the Gross Domestic Product and
more than 80 per cent of the employment. Rice is the major cereal product followed by maize, wheat
and millet. Of the cash crops
∗ potato, sugarcane, oilseeds, jute and tobacco are the major ones.
Woollen carpets and ready-made garments are the leading export items that constitute about
85 per cent of the total overseas exports. Growth in the manufacturing sector has been basically led by
food manufacturing, beverage production and cement production. Besides, the country alsospecializes in handicrafts. Tourism has remained a major source of foreign exchange earning and is
estimated to account for 2 to 3 per cent of the GDP. The main economic indicators are presented in
Annex I, Table 1.
(b) Current  Economic Situation
The macro-economic indicators revealed a mixed performance in the Seventh
(1985/86-1989/90) and Eighth ( 1992/93-1996/97) Plan period. The real growth rate during the
Seventh Plan period stood at 4.8 per cent averaging 5.1 per cent in producer price during the EighthPlan. In FY 1996/97 the growth rate dropped to 4.0 per cent. Likewise, the rate of inflation, which
averaged at 11.6 per cent during the Seventh Plan came down to 8.3 per cent during the Eighth Plan
period. In FY 1996/97 it was around 8 per cent.
Government revenue increased by more than 18 per cent, on average, during the Seventh Plan
period and stood at 11 per cent of GDP during the Eighth Plan whereas the expenditure growthaveraged at 17.9 and 14.2 per cent of  GDP during the Seventh and Eighth Plan period respectively.
The revenue as a per cent of GDP was 8.7 per cent in FY 1992/93 that reached 11.2 per cent in
FY 1995/96. Similarly, expenditure as a per cent of GDP, which was 17.3 per cent in FY 1992/93,
reached 17.8 per cent in FY 1995/96. Although reve nue has been increasing, there has been only a
modest rise in the revenue-GDP ratio. In fact, tax collection in Nepal is one of the lowest in SouthAsia.
The external sector has witnessed a favourable balance of payments for the last decade,
despite perennial trade deficits. The growth of exports that was 14.8 per cent during the Seventh Plan
                                                     
∗ Cash crops refer to crops produced mainly for sale, and not for consumption by the producers.WT/ACC/NPL/2
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period declined to 11 per cent during the Eighth Plan period. Imports grew by 19 per cent on an
average during the Seventh Plan period increasing to 24.7 per cent during the Eighth Plan period. The
main reason for such decline was the negative growth  rate in FY 1994/95. Trade deficit also increased
from 13.3 per cent of GDP in FY 1992/93 to 23.7 per ce nt in FY 1995/96. The current account deficit
increased from 6 per cent of GDP in FY 1992/93 to 9 per cent in FY 1995/96 and narrowed down to
5.9 per cent in 1996/97.
Despite the current account deficit, the balance of payment showed a sizable surplus owing
largely to the inflow of official capital in the form  of foreign loans and private capital in the form of
foreign direct investment and other short-term credit s. As a result, the foreign exchange reserve of the
banking system has increased from about US$4.5 million in FY 1985/86 to US$0.655 billion in
FY 1994/95. At the end of Fiscal Year 1995/1996, foreign reserves amounted to US $1.236 billion of
which banking sector reserves were US$0.717 billion with the Central Bank accounting for the
remainder. During the first 9 months of FY 1996 /97 foreign reserves amounted to US$1.113 billion.
The current reserves (May-June 1998) of the Central Bank cover 8 months of imports.
Rising trade deficit has also affected the current account deficit position negatively in recent
years. Increased foreign direct investment and loans helped improve balance of payment position. The
surplus in the balance of payment is estimated to be US$0.029 billion in FY 1996/97 compared to
deficit of US$0.0195 billion in FY 1995/96.
2. E CONOMIC POLICIES
(a) Main directions of the ongoing  economic po licies, tactical and strategic goals of the
economic policies, pricing policy, economic development plans, privatization plans,
sectoral priorities, regional development plans, etc.
The government has opted to shift its role from direct intervention to promotion and
regulation of economic activities. The current industrial policy allows for the development of almost
all industrial ventures without license. Nepal encourages foreign investment in the form of joint
venture operations and up to 100 per cent equity shareholdings in industries. There are no foreign
exchange restrictions.
The country has introduced full convertibility of the Nepalese rupee on current account.
Liberalisation of the financial sector has resulted in the establishment of varieties of financial
institutions providing specialized financial services. The establishment of commercial banks in the
private sector, introduction of finance companies, establishment of new rural development banks, and
evolution of a full fledged stock exchange are expected to strengthen the financial system and provide
finance required for industrial and business expansion.
Nepal's external sector has faced trade deficits for decades. The cumulative trade deficit,
which stood at US$353.78 million in 1992/93, increased to US$1,164.24 million in 1996/97.
Since 1990, the government has been reviewing the roles of the public and private sectors in
the economy. In this context creation of legal fram ework for the promotion of economic activities of
both the private and public sectors has been stressed. The government has pursued privatization policy
whereby a number of public enterprises are being privatized. Sixteen public enterprises have already
been privatised. Some others are selected for privatisation in FY 1997/98. Among the enterprisesselected for privatisation are a power company, a tea estate and a national newspaper publishing
company. Analysis of additional six public enterprises, which will possibly be privatised in FY
1998/99, is due to start during this fiscal year. Besides, the government has adopted liberal economic
policies for private sector participation in the infrastructure sector including transport,
communications, power and irrigation as well as in education and health. The response has beenWT/ACC/NPL/2
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encouraging. The private sector has entered into air transportation, communications, and hydropower.
By attracting more resources of the private sector into these areas, the government intends to focus its
attention on the social sector.
The government has formulated a Master Plan for the energy sector to cope with the demand
for energy. Foreign participation has been encouraged in the sector. As a result of the government
policy, the trend observed so far in foreign private investment is encouraging. Likewise, in theindustry sector the government intends to promote foreign investment as it believes that it will
contribute to diversify and increase the competitiveness of the Nepalese economy. The state's
industrial policy is today positively committed to a liberal economic regime for the wider
participation of the private sector.
His Majesty’s Government has formulated the Ninth Five Year Plan starting from FY
1997/98 to 2001/2002.The main objectives of the plan are to empower people economically and
socially by integrating them into the mainstream of the nation's development process by alleviatingpoverty and making the nation economically prosperous. The plan which is trying to make a dent into
the prevailing widespread poverty situation in the country aims:
(i) to develop the agricultural sector in accordance with the Agricultural Perspective Plan
(APP);
(ii) to develop water resources, power, and energy to strengthen  the overall economic and
social development base and to fulfill the needs of  various sectors through multi-
dimensional utilisation of water resources;
(iii) to emphasize human resource and social development in the process of overall
development in order to make proper use of available resources, national heritage and
various opportunities;
(iv) to develop industry and tourism sectors in order to increase production and income and
promote the non-agricultural employment opportunities;
(v) to develop physical infrastructures such as road, bridges, air transport, communications,
and the like which are prerequisites for overall economic and social development.
The Nepalese agricultural development policy is embodied in the Nepal Agriculture
Perspective Plan (APP) adopted by the Government in 1995. The following are the main objectives of
the APP:
(i) to accelerate growth rate in agriculture through increased factor productivity;
(ii) to alleviate poverty by achieving significant improvements in the standard of living
through growth and expanded employment opportunities;
(iii) to transform transition subsistence-based agriculture into a commercial one through
diversification and widespread realization of comparative advantages;
(iv) to fulfill the production of agricultural development as the base to expand the
opportunities for an overall economic transformation; and
(v) to identify immediate, short-term and long-term strategies for the implementation of the
APP, and to provide clear guidelines for preparing periodic plans and programmes in the
future.WT/ACC/NPL/2
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The strategy for achieving the objectives of the APP has the following fundamental
components:
(i) concentration of public sector investment in a small number of input priorities: shallow
tubewell irrigation, agricultural roads, easy availability of fertilizers and the technology
system of research and extension have been identified as the priority inputs;
(ii) concentration of efforts to facilitate intensification of agriculture: livestock,  cereals
(paddy, wheat), citrus, apple, off-season vegetables, vegetable and flower seed, bee-
keeping products, silk, and forest products.
(b) Monetary and fiscal policies
Monetary Policy
The monetary policy of Nepal is geared towards controlling excessive liquidity so as to
control inflationary pressures, and to improve the balance of payment situation of the country.
Accordingly, broad money and narrow money aggregates are targeted to increase in line with thepredetermined benchmarks. The Central Bank (Nep al Rastra Bank, NRB) has given up exercising
direct instruments of monetary control since the early 1990s and has resorted to indirect instruments
only. In this context, open market operations has become the main instrument of monetary control in
Nepal. Treasury bills and NRB bonds are two instruments used in such operations. Besides open
market operations, bank rate and the cash reserve ratio are the other additional instruments at thecommand of the Central Bank for monetary control. However, they are used less frequently. The
Central Bank has recently reduced the cash reserve ratio (CRR) of commercial banks from 12 per cent
to 10 per cent to encourage credit flow in the private sector by the commercial banks. Similarly,
refinance rates have declined from 11 to 9 per cent.
Fiscal Policy
Since the start of the 1990s Nepalese Government has pursued an ambitious tax reform
programme with the aim of raising public savings, reducing reliance on direct taxation and to improve
the overall efficiency and fairness of the tax system. Reforms have been undertaken to broaden the tax
base, lower income tax rates, and to simplify the rate structure across a whole range of taxes. The
current fiscal policy of the Government is to pur sue the following major objectives: (i) reduction of
unproductive expenditure in the public sector;  (ii) reform of the income tax structure by reducing
high rates and broadening the tax base; (iii) reduction of net domestic borrowing to 0.5 per cent of
GDP; and (iv) streamlining of bureaucracy.
(c) Foreign exchange and payment system and relations with the IMF, application of 
foreign exchange control if any
The Central Bank publishes exchange rates for its transactions and the market rate is
determined by the foreign exchange market. Impor t licenses to obtain foreign currency for specific
goods are no longer required. The present system facilitates 100 per cent of capital transfer in the
form of foreign investment and subsequent repatriation of profit in foreign currencies. Foreign
currency bank accounts can be freely opened. In case of the emergence of balance of payment (BOP)
problems, the government may resort to restrictive measures.
The Nepalese Rupee has been pegged to the Indi an Rupee at the rate of NRs. 1.6 per Indian
Rupee since February 1993, and movements in the value of the Nepalese Rupee reflect movements in
the Indian Rupee against third country currencies. The current exchange rate is about 67.00 Nepalese
Rupees per US Dollar (June 1998).WT/ACC/NPL/2
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Several amendments have been made in the Foreign Exchange (Regulation) Act, 2019 (1962)
in order to reflect the liberalisation policy. A number of money changers have been opened in the
main cities of Nepal, and some other are in the pr ocess of approval by the Central Bank. Thus Nepal
has effectively and successfully created a free and open financial market in the country. Moreover, it
is worth mentioning that the Government declared its commitment to make Nepal an international
financial services centre in its budget program of fiscal year 1995/96. To implement its program, theGovernment has formulated an act of the same title in this regard.
In 1992/93, Nepal entered into the Enhanced Structural Adjustment Facility (ESAF) with the
International Monetary Fund. However, it was discontinued in FY 1994/95 due to some political
changes. The government is trying to re-enter ESAF again.
(d) Foreign and domestic investment policy
A major objective of national economic policy is to promote and encourage transparent and
fair business environment for both domestic and foreign investment, and to increase the role of theprivate sector in Nepal’s development process. For this purpose, a liberal industrial policy was
adopted in 1992, and the Industrial Enterprises Act, 1992, the Foreign Investment and Technology
Transfer Act, 1992, and the One Window Policy of 1992 were announced. Under this policy, a high
level committee has been formed with the Director General of the Department of Industries as its
Coordinator in order to coordinate the activities of various agencies related to industrial enterprises.The major thrust of these acts and policies lies in their openness with emphasis on market-driven
strategies, and the dominant role of private initiative and enterprise.  The Government acts as a
facilitator to the private sector and concentrates its efforts on the development of the infrastructure
required, as well as in guaranteeing a stable macroeconomic environment. The policies and acts
mentioned above apply to all sectors of economic activities within the country.
The Industrial Policy of 1992 identified foreign investment promotion as an important
strategy in achieving the objectives of increasing industrial production, meeting the basic needs of the
people, creating maximum employment opportunities, and paving the way for improvement in the
balance of payment situation. Foreign investment is expected to supplement domestic private
investment through foreign capital flows, technolo gy transfer, and providing access to international
markets. The first amendment of the Foreign Investment and Technology Transfer Act (FITTA), 1992
in 1996 has opened further avenues for investors, and has also simplified the administrative
procedures.
Some of the salient features of the Industrial Enterprises Act, 1992 and of the Foreign
Investment and Technology Transfer Act, 1992 (as amended) are:
(i) foreign investment requires an approval from the Department of Industry.  A person
desiring to avail the foreign investment or technology transfer shall be required to make
an application to the Department. It grants permission in accordance with decision of the
Industrial Promotion Board within 30 days from the date of application;
(ii) foreign investors are allowed to hold 100 per cent ownership in industries;
(iii) foreign investment is open in every sector of economic activities, except for very few
sectors such as cottage industries, arms and ammunitions, security printing currenciesand coinage, retail business, travel and trekking agencies, consultancy services, etc.
(Specified in Annex of the Industrial Enterprises Act, 1992);
(iv) technology transfer is encouraged in all public enterprises of industries;WT/ACC/NPL/2
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(v) the law prohibits nationalization of any private sector industries;
(vi) the Government does not intervene in fixing the prices of industrial products in the
private sector industries.
The statutory provision of FITTA guarantees full repatriation of the amount received from the
sale of equity, profits, or dividends and interest on foreign loans, and the repatriation of the amount
received under an agreement for the transfer of technology.
Foreign investors will be granted a business visa until their investment is retained. Resident
visa will be provided for a foreign investor, who, at a time, makes an investment in excess of
US$100,000 or equivalent and retains it.
Nepal is a member of the Multilateral Investment Guarantee Agency (MIGA), has signed
Reciprocal Encouragement and Protection of Investment Agreements with France, Germany, and the
United Kingdom, and is underway to conclude such agreements with a number of other countries.
Agreements avoiding double taxation have, moreover, been reached with India, Norway, andThailand.
(e) Competition policy
In Nepal, currently there is no specific legislation on competition but the Government feels
the need to introduce legislation to guarantee free and fair competition in the country.
(f) Privatization policy
In 1992, HMG Nepal launched a comprehensive privatization programme. The current
privatization process is ruled by the Privatization Act, 2050 (1994).  During the first stage of this
programme, ten public enterprises were privatized; among them: Bansbari Shoes and Leather Factory
(BSLF), Bhrikuti Paper Mill (BPM), Brick and Tile Factory Harisiddhi (BTFH), Nepal Film
Development Corporation (NFDC), Balaju Cott on Factory (BCF), Raw Hide Collection and
Development Corporation (RHCDC), Nepal Bitumin and Barrel Industry (NBBI), and Nepal Lube Oil
Limited (NLOL). In the second stage of the process, since September 1995, two companies,
Raghupati Jute Mill and Nepal Foundry have been sold. Leasing arrangements have been agreed for
two other enterprises—Bhaktapur Brick Factory and Biratnagar Jute Mill. Nepal Coal Limited will be
transferred to employees. HMG has listed 25 more enterprises for privatization in the near future,including some large-scale ones. In the financial sector, HMG has sold 10 per cent of its equity shares
in Nepal Bank Limited (NBL), lowering government ownership to 41 per cent.
HMG has also established a Privatization Unit in the Ministry of Finance for the supervision
and coordination of the privatized SOEs (State-owned  Enterprises). This unit is also responsible for
the selection of other SOEs which have to be privatized. At present HMG has privatized 16 publicenterprises and privatization process is still underway.
3. F
OREIGN TRADE IN GOODS AND SERVICES
(a) Volume and value of trade
The total volume of trade is increasing in a pr ogressive manner. In absolute terms, total trade
increased from US$896.39 million in 1992/93 to, US$1532.43 million in 1995/96 and increased to
1882.0 million in F.Y. 1996/97. As a percentage of GDP, total trade, which stood at nearly 22 per cent
in 1980/81, increased to 23.3 per cent in 1990/91 and further to 39 per cent in 1995/96. The shares ofWT/ACC/NPL/2
Page 8
exports and imports in total trade stood at 20 per cent and 80 per cent respectively in the year
1995/1996 and was 19.1 and 80.9 per cent in FY 1996/97.WT/ACC/NPL/2
Page 9
(b) Exports and imports
Exports
Total export value recorded a continuous growth over the past years except in 1994/95. Total
export, which stood at US$274.08 million in 1992/93, increased to US$314.98 million in 1995/96. It
increased further to US$358.71 million in FY 1996/97. As a percentage of GDP, exports increased
from 5.8 per cent in 1985/86 to 10.4 per cent in 1992/93 and was only 8.3 per cent in FY1995/96. Theliberalization of import of industrial raw materials along with the exchange rate adjustment has been
instrumental in the growth of exports in the past. The fall of export in absolute terms in 1994/95 is due
to decrease in the export of woollen carpets and ready-made garments. Total exports increased, on
average, by 11 per cent between 1992/93 and 1996/97.
Imports
Total import value has recorded a significant growth over the past years. Total import, which
stood at US$622.31 million in 1990/91, increased to US$1,217.45 million in FY1995/96 and further
to US$1,522.95 in the year 1996/97. The import nearly doubled in 1995/96 compared to 1992/93. As
a percentage of GDP, import increased from 23.7 per cent in 1992/93 to 32.0 per cent in 1995/96.
Total import increased, on average, by 24.7 per cent between FY 1992/93-1996/97.
(c) Structure of trade
Structure of exports
There has been structural shift in the composition of exports in the later part of the 1980s and
early part of the 1990s as compared with the 1970s and early 1980s. In 1980-1991 around 70 per cent
of Nepal's total exports comprised primary commodities; manufactured goods accounted for 30 per
cent.
In 1992/93, the share of primary goods in total exports declined to around 14 per cent and the
share of manufactured goods increased to 86 per cent. In the year 1995/96 the share of manufactured
goods in total export was 82 per cent where as the share of primary good was only 18 per cent. The
major exportable items included woollen carpets, ready-made garments, leather, handicraft, and jute
goods. Carpets and garments alone contributed more than 78.3 per cent of Nepal's total exports in the
1992/93 and 65.6 per cent in year 1996/97.
The primary commodities are largely exported to India, and manufactured goods to third
countries. Exports to India consist mainly of jute and jute goods, dried ginger, cardamom, ricebran,
oil, pulses, and oil cake; while exports to third countries mainly consist of carpets, garments, hide and
skin, and handicrafts. (Details in Annex 1.)
Structure of imports
Nepal's imports consist of various items ranging from primary goods to manufactured
consumer goods, fuels and lubricants, chemicals and drugs, machinery and transport equipment.  In
1995/96, manufactured goods accounted for almost 60 per cent of the total imports. In the year
1994/95, the percentage increase in imports was 23.5 per cent, and in the years 1995/96 and 1996/97
the growth rates were 20.4 per cent and 25.1 respectively.WT/ACC/NPL/2
Page 10
(d) Trade by geographic areas and dynamics of trade
Trade by geographic areas
After FY 1984/85 India's share in Nepal's total trade went on decreasing and that of other
countries kept on increasing. The percentage shares of India and other countries in 1985/86 were 42.0
and 58.0 respectively. In FY 1995/96, India's share decreased to 27.5 per cent and other countries
share increased to 72.5 per cent. Again in FY1996/97 India's share dropped to 26.5 per cent and theshare of other countries stood at 73.5 per cent.  HMG/N has signed bilateral trade agreements with 17
countries. Nepal is a member of SAPTA, which has been effective from December 1995. The
agreements with India and SAPTA are preferential ones. The Ninth SAARC Summit, which took
place in 1997 has decided to move from SAPTA to SAFTA (South Asian Free Trade Area) by the
year 2001. This apart, Nepal has trade with more than 50 other countries of the world. The country
exports and imports a large volume of goods from abroad. On the export front, the major trading
partners are Germany, United States, India, Bangla desh, Italy, Switzerland, Austria, United Kingdom,
France, and Belgium. In FY 1996/97, these countries' share in the total exports remained 33, 25, 23,
2.15, 1.5, 1.5, 1.4, 1.2, 1.04, and 1.03 per cent respectively. The rest (9.35 per cent) exported to other
countries included Tibet Autonomous Region of the People's Republic of China.
On the import front, major trading partners are: India, Hong Kong (until 1997), Singapore,
UAE, Japan, UK, China PR, Switzerland, New Zealand, and Thailand. In FY 1993/94, thesecountries, shares in the total imports were 27.53, 21.56, 10.59, 5.93, 4.21, 3.35, 3.20, 2.47, 2.34 and
1.73 per cent respectively. The rest (17.09 per cent) was imported from other countries.
Dynamics of trade
Until the 1970s more than 90 per cent of Nepal's foreign trade was directed towards India.
The trade diversification policy pursued by the government during the 1970s led to a significant shiftin the direction of Nepal's trade. As a result, the share of India in Nepal's total trade declined from
52.5 per cent in 1980/81 to 25.1 per cent in 1990/91 which increased to 27.5 per cent in the year
1995/96 and again declined to 26.5 per cent in 1996/97. Full convertibility of Nepalese currency on
current account, exemption of income tax on earnings from export, timely duty refund on exports, and
minimum service charge levied on exports contributed to a significant diversification of Nepal'sforeign trade.
4. D
OMESTIC TRADE IN SERVICES INCLUDING VALUE AND COMPOSITION OF FOREIGN DIRECT 
INVESTMENT
The service sector is assuming a more important place in the structure of the economy. The
share of services in GDP has been steadily increasing. In 1997, it reached 39.7 per cent with a growthrate of 5.5 per cent. The increase in the share of service sector is mainly attributed to the expansion of
trade and tourism services. In view of the importance of foreign capital for industrial development,
efforts have been made to attract foreign investment through the implementation of liberal and open
policy. Till mid April 1997, a total of 356 joint venture enterprises were given permission to establish
industries. The total fixed capital of these joint venture enterprises is US$710 million while the total
project costs in these enterprises are US$807 million. Similarly, total foreign investment in these
enterprises is US$163 million.
5. I
NFORMATION ON FINANCIAL MOVEMENTS RELATED TO NATIONALS WORKING ABROAD 
(REMITTANCES )
A certain class of people in Nepal join the Indian and British armies. Besides, there is now
also a flow of Nepalese citizens (skilled/unskilled) to foreign countries including India in search ofWT/ACC/NPL/2
Page 11
better earnings. Every year these people remit part of their earnings, which is an important source of
receipt, under transfer head of the balance of paym ents of Nepal. Such private remittances in 1992/93
amounted to US$47.53 millions which increased to US$68.0 million in 1995/96 and further to
US$69.49 million in 1996/97. As a per cent of the net transfer, it came to be 43.2 per cent, 35.1 per
cent, and about 29 per cent, respectively. Thus the share of the transfer remittance in net transfer is
changing.
6. I NFORMATION ON GROWTH IN TRADE IN GOODS AND SERVICES OVER RECENT YEARS AND 
FORECASTS FOR YEARS TO COME
Information on the growth in trade up to the year 1998 is given below. Growth in trade
depends largely on product diversification and appr opriate trade policy of the country. Occasionally,
exportable items occupying important role have been changed. Since recently, woollen carpets and
ready-made garments have played a significant role in the export trade in Nepal. It is expected that
country and product diversification of trade will continue in the future. HMG is convinced thataccession to the WTO will foster this process.
Direction of Trade
(Rs. in million)
X/M 1992/93 1993/94 1994/ 95 1995/96 1996/97 1997/98
(First 8
months)
Export
  India
  Other Countries17.266.5
1,621.7
15,644.819,293.4
2,408.9
16,884.517,639.2
3,124.3
14,514.919,843.7
  3,978.6
15,865.122,598.6
5,577.1
17,021.516,640.4
5,303.9
11,336.5
Import  India
  Other Countries39,205.6
12,542.1
26,663.551,570.8
17,035.4
34,535.463,679.5
19,615.9
44,063.676,699.2
25,588.1
51,111.195,946.0
25,843.8
70,102.250,451.4
16,874.9
33,576.5
Total Trade  India
  Other  Countries56,472.1
14,173.8
42,308.370,864.2
19,444.3
51,419.981,318.7
22,740.2
58,578.596,542.8
29,566.7
66,976.1118,544.6
  31,420.9
87,123.767,091.8
22,178.8
44,913.0
Source: Economic Survey, Ministry of Finance. Trade Promotion Centre
III FRAMEWORK FOR MAKING AND ENFORCING POLICIES AFFECTING 
FOREIGN TRADE IN GOODS AND TRADE IN SERVICES
1. P OWER OF EXECUTIVE , LEGISLATIVE AND JUDICIAL BRANCHES OF GOVERNMENT
(a) General introduction to executive branch of government
After a popular movement launched in 1990, the then existing partyless Panchayat System
was dissolved. A new democratic constitution was promulgated in the same year. The newconstitution, the Constitution of the Kingdom of Nepal, 1990 (hereinafter referred to as the
"constitution") established a Westminster-style government with the King as the Head of the State and
the Prime Minister responsible to the parliament, as the Head of the Government, and an independent
judiciary. The parliament is a bicameral legislative body, but, as in other parliamentary countries, the
lower house (the House of Representatives) is more powerful than the National Assembly, the upper
house. The executive, legislative, and judicial powers are well defined and separated by the
constitution. The executive power in the country with the responsibility of issuing general directives,controlling and regulating of the administration is vested in His Majesty the King and the Council of
Ministers, the Cabinet. His Majesty the King as the Head of the State appoints the leader of the Party
which commands a majority in the House of Representatives as Prime Minister and constitutes theWT/ACC/NPL/2
Page 12
Council of Ministers on his recommendation and under his chairmanship. The Prime Minister and the
other ministers in the government are collectively responsible to the Parliament. The other ministers
are also individually responsible for the business of their respective ministries to the House of
Representatives as well as to the Prime Minister.
(b) Composition of parliament and legislative  branch
The parliament consists of His Majesty the King and the two Houses of parliament, namely
the House of Representatives and the National Assembly. The House of Representatives consists of
two hundred and five members elected from one-man election constituency on the basis of one-
person-one-vote system through a secret ballot by Nepalese citizens who have attained the age of
eighteen years. Nepal has adopted the simple plurality or "first past the post" election system under
which a candidate securing the largest number of popular votes in a given constituency is elected. The
National Assembly (the upper house) consists of sixty members, ten of which are nominated by His
Majesty the King from amongst persons of high reputation, and 35 members, including at least threewomen members, are elected by the House of Representatives on the basis of proportional
representation by means of the  single transferable vote system. Fifteen members are elected also from
five Development regions on the basis of a single transferable vote system by an electoral college
consisting of the chiefs and deputy chiefs of Village Development Committees and Municipalities and
the chiefs, deputy chiefs and members of the District Development Committees of each region. Thetenure of the members  of the House of Representative is five years. The National Assembly is a
permanent house. The tenure of one-third of its members expires every two years.
Except as otherwise expressly provided in th e constitution, the parliament is empowered to
enact any law. A bill passed by one house of the parliament is transmitted to the other house as soon
as possible and if the receiving house passes it, it is presented to His Majesty the King for his assent.A bill becomes an act immediately in accordance with the constitution. The Government is
empowered to promulgate rules or regulations under a delegated legislative power vested under an act
of parliament. The constitution provides certain specific provisions concerning ratification of,
accession to, approval of, and acceptance of a treaty. Depending on the content, nature, and term of a
treaty, a joint sitting of both houses of the parliament or the House of Representatives is authorized toratify or accede to. Normally, multilateral treaties concerning trade which require ratification of
accession are ratified by the House of Representatives by a simple majority vote. Once treaties are
ratified, they are executed at the national and international levels. A treaty may be invoked on a
collateral issue, which the courts may have to determine before adjudicating on the rights of the
parties.  However, the Supreme Court, in case it decides that the provision of an act is inconsistentwith the provision of a treaty to which His Majesty's Government is a party, the provision of the treaty
in question prevails. Under the Nepal Treaties Act, 2047 (1990) in case of divergence between the
provisions of Nepalese law and provisions of the in ternational treaty to which the kingdom is a party,
the provision of the treaty shall apply to the extent of divergence.
(c) Composition of judiciary and its nature
The judiciary of the country is an independent organ. The powers relating to justice in the
kingdom are exercised by the courts and other judicial tribunals in accordance with the provisions ofthe constitution, the laws of the country, and universally recognized principles of justice. The
judiciary  of the country comprises three tiered co urts consisting of 75 District Courts, 11 Appellate
Courts, and one Supreme Court. The Chief Justice of  the Supreme Court of Nepal is appointed by His
Majesty the King on the recommendation of the Constitutional Council, a constitutional body
composed of the Prime Minister, the Chief Justice, the Speaker of the House of Representatives, theChairman of the National Assembly, and the Leader of the Opposition in the House of
Representatives as its members. Appointment of othe r judges of the Supreme Court, Appellate Courts,
and District Courts is made by His Majesty the King on recommendation of the Judicial Council. InWT/ACC/NPL/2
Page 13
Nepal, judges are not part of the civil service and the terms and conditions of their service have been
determined by law as required by the constitution. The Supreme Court, the apex of the judicial
system, has, inter alia, extraordinary jurisdiction for the enforcement of fundamental rights as
provided by the constitution in Part 3 and can issue appropriate order and writ including  the writ of
habeas corpus, mandamus, certiorari, prohibition and quo warranto. Moreover, it is also empowered
to declare any law or any part thereof either void ab initio or from the date of its decision on theground of inconsistency with the constitution, because such law imposes an unreasonable restriction
on the enjoyment of the fundamental rights of the citizen. Similarly, appellate courts may issue habeas
corpus, mandamus writs and injunction orders.
2. G
OVERNMENT ENTITIES RESPONSIBLE FOR MAKING AND IMPLEMENTING POLICIES AFFECTING 
FOREIGN TRADE
Under article 35 of the constitution of the Kingdom of Nepal, 1990, the executive power of
the kingdom of Nepal is vested in His Majesty and the Council of Ministers. Article 41 of theconstitution provides that the allocation and conduct of activities of His Majesty's Government is to
be carried out as set forth in the rules approved by His Majesty. His Majesty's Government
(Allocation of Business) Rules, 1990 (as amended), allocate the functions of the government among
the various ministries, i.e., government entities, according to which the following Ministries are
responsible for making and enforcing the policies affecting foreign trade in goods and services:
(a) The Ministry of Commerce is principally responsible for making and enforcing policies on
trade including foreign trade. The responsibilities of this ministry include:
(i) Formulating and enforcing trade policy.
(ii) Study, research, and survey on internal and international trade.
(iii) Making policy decisions on import and export trade regime and conducting international
trade relations.
(iv) Formulating policies and setting requirements for public trade enterprises.
(v) Preparing and negotiating treaties and agreements relating to foreign trade (and transit),
as well as participating in bilateral and multi-lateral intergovernmental trade negotiations.
(vi) Contact, assistance and coordination with national, regional, international organizations
pertaining to trade and transit.
(vii) Study and survey of different means of carriage of goods in the internal and international
trade, and of the management necessary for cheaper carriage, including multi-modal
transport schemes.
(viii) Training to develop capable manpower in the appropriate areas.
Apart from the Ministry of Commerce, a separate Department of Commerce exits under it.
The Department of Commerce deals with technical issues such as the registration of trade firms, and
where appropriate, permits licenses or authorization for goods to be imported  in or exported from
Nepal.
Besides that, Trade Promotion Centre operates as a separate government undertaking to
promote foreign trade, particularly overseas trade.WT/ACC/NPL/2
Page 14
(b) The Ministry of Finance is responsible for activities related, inter alia, to: currency; banking,
insurance, revenue policy and planning; revenue administration and collection of customs duties and
taxes levied by the government from time to time; general price policy for State-owned enterprises
(SOEs); exchange and control of foreign currencies and control of accounts as well as mobilisation of
foreign  aid. As the customs duties and taxes fall within the scope of this Ministry, it is also
responsible directly or indirectly for some trade matters and policies.
(c) The Ministry of Industries is responsible for policies related, inter alia, to: foreign investment,
promotion thereof and matters relating thereto; promotion of industrial investment; development and
transfer of technology; industrial promotion and protection; patent design and trade mark. These
matters are also related to trade issues.
(d) The Ministry of Tourism and Civil Aviation is responsible for issues  related, inter alia, to:
tourism  industry and tourism promotion; trekking, mountaineering; development of air transportation
and other tourism trade related service and issues.
(e) The Ministry of Works and Transport is responsible for activities related, inter alia, to: policy
on development of inland and water transport; regulation of transportation and carriage by land and
sea including multi-modal transport and trade facilitation.
(f) The Ministry of Labour is responsible for activities related, inter alia, to: labour policy and its
implementation; study and research of labour force and labour market, and its use; contact andrelation with national, international organizations related to labour; relation between labour and
management; employment service and labour supply; trade union and social security of labourers;
work permit to foreigners; administration and management of labour.
(g) The Ministry of Supplies is responsible for issues related, inter alia, to: the policy on supplies
of basic needs goods and its implementation; supervision of the market and regulation of policy pricesfor enterprises under it; regular and balanced supply of the consumption goods and necessary
consumption goods through these enterprises. The Ministry works in close coordination with the
Ministry of Commerce.
(h) The Ministry of Agriculture is responsible for activities related, inter alia, to: policy on
agriculture and agriculture production in general; development and improvement of food, cash andindustrial crops; agricultural engineering and sophisticated agricultural inputs; agricultural nurseries
and development of seeds; development of dairy and dairy products; fishery; marketing and price
regulation of basic agricultural products, agricu ltural inputs, and development of agricultural
technology; plant quarantines; food research, and import, sale and distribution of fertilizers and
agricultural inputs.
3. D
IVISION OF AUTHORITY BETWEEN CENTRAL AND SUB -CENTRAL FORM OF GOVERNMENT
The constitution of Nepal provides a unitary form of government. Unlike a federal structure
of the government, there is no division of authority between central and sub-central or regional
government in Nepal. However, the laws of the country provide for delegation of authority to the
local authorities as and when required.
4. A NY LEGISLATIVE PROGRAMMES OR PLANS TO CHANGE THE REGULATORY REGIME
In the context of the current reform programme, new acts or amendments to existing ones are
under consideration with the aim of increasing consumer protection and improving transparency of
administrative decisions.WT/ACC/NPL/2
Page 15
5. L AWS AND LEGAL ACTS
Laws and legal acts affecting trade are referred to in Annex 2.
6. D ESCRIPTION OF JUDICIAL , ARBITRAL OR ADMINISTRATIVE TRIBUNALS OR PROCEDURES , IF 
ANY
Nepalese courts are competent to entertain and adjudicate all suits concerning real estates
located in Nepal and estate matters with respect to assets in Nepal and also any other suits, if the
defendant is domiciled in Nepal or the claim derives from an event that has occurred in Nepal or from
any act made or done in Nepal regarding the defendant's domicile. If a foreign company has a branch
in Nepal; it is treated as a domiciled party. A Nepalese court may also adjudicate suits concerning
transactions made abroad if both the plaintiff and defendant are domiciled in Nepal. Summons are to
be served on defendants domiciled abroad through letters rogatory issued by the courts. No. 34 of
Adalati Bandobasta (court management) of Muluki Ain (Civil Code) provides that summons to be
served on defendants domiciled in Nepal through letter rogatory issued by the foreign courts aresatisfactory only if a reciprocal agreement to that effect has been concluded by the Government with
the foreign state concerned. Muliki Ain is the general law of the land and any other specific act may
replace the provision of the Muluki Ain if a specific act to that effect is made. In addition to the above
mentioned courts, there is also a provision in the constitution which stipulates that law may provide
for the establishment of special public enterprises of courts and tribunals for the purpose of hearing ofspecial cases. However, a special court or tribunal may not be constituted for the purpose of hearing a
particular case. In practice, there are special permanent tribunals to adjudicate and resolve revenue
disputes (Revenue Tribunals), labour disputes (La bour Court) and disputes concerning dismissal of
civil service employees (Administrative Court). Howe ver, there are no special courts, or tribunals so
far to adjudicate trade disputes in Nepal.
There is, however, Arbitration Act, 1981 under which disputes of commercial nature arising
out of an agreement may be settled through arbitrati on as provided for in such an agreement. If the
agreement providing for arbitration fails to lay down rules regarding the number of arbitrators or
governing laws, the provisions of the Arbitration Act apply. As a matter of fact, arbitration has
become an effective mechanism for settlement of di sputes arising out of commercial contracts. Nepal
is a party to the Convention on recognition and Enforcement of Foreign Arbitral Award done at Rand
arbitral award made abroad may be executed in Nepal subject to the conditions stipulated by the said
convention .
IV. POLICIES AFFECTING TRADE IN GOODS
1. I
MPORT REGULATION
(a) Registration requirements for engaging in importing
As provided by the Company Act 1997, any person desiring to engage in industrial business
activities in Nepal is required to register with the Ministry of Industry, Company Registration Office.
Business firms for commercial or trade in goods are supposed to be registered at the Department of
Commerce in accordance with the Private Firm Re gistration Act  1956 (2014)  and  Partnership Act
1962 (2020). Foreign- owned companies, or joint co mpanies with foreign participation, according to
the Foreign Investment and Technology Transfer Act of 1992 are required to make an application tothe Department of Industry within the Ministry of Industry for obtaining permission to engage in
industrial business in Nepal. Individuals for personal purpose (limited quantity, not for trading and
business) can import without any registration requirements. According to the Customs Act of 1962, as
amended, persons, firms or companies desirous of working as agents for delivery of goods must
obtain a license from the Customs Office on payment of the prescribed fee. Persons, individuals orWT/ACC/NPL/2
Page 16
firms desiring to engage in agency service for trade and other commercial purpose must be registered
in the Department of Commerce as provided by Nepal Agency Act 1962.WT/ACC/NPL/2
Page 17
(b) Characteristics of national tariff
The Evolution of the Customs Tariff Regulation
Nepal has, in recent years, shifted from a highly regulated high tariff import regime to a
liberal one. In the 1980's there were multiple tariff rates applied on imports, more than four hundred,
and the peak tariff rate was as high as 255 per cent. Since late 1980's and particularly since the early
1990's, there has been a downward revision in tariff  rates, and a simplification of the tariff rate
structure. Previously, the customs tariff structure of Nepal comprised general and additional rates on
imports. However, no additional duties were levied on imports from countries with which Nepal has
preferential trading arrangements. The additional duties were abolished in 1994 to simplify customs
administration. Now the basic rates are uniform irrespective of diverse sources of imports. The
number of tariff rates were reduced to 5 slabs in the budget year 1995/96, and the maximum tariff rate
is now 80 per cent for certain goods such as cars, jeeps, arms ammunition, cigarettes, etc. with a
minimum tariff rate up to 5 per cent for daily consumption items.
Customs Tariff Nomenclature
The Harmonized System of Commodity Classificat ion (HS) was incorporated in Nepal since
the budget speech of the fiscal year 1992/93, and si nce then it has been brought into effect in the
customs administration. The 1996 version of the HS Nomenclature was put into effect with the budget
speech for fiscal year 1996/97 with the inclusion of the required amendments and corrections.
Public enterprises of Duty
Customs duties are imposed on imported goods in accordance with the rates mentioned in
column 4 of the commodity classification of chapters 1 to 97 under sections 1 to 21 of Nepal’s
Customs Tariff.  As a general rule, ad valorem duties (calculated as percentage of value) are applied.
However, a very limited number of products such as motor fuels, kerosene oils, gas and fuel oils,cement clinkers and some cements are subject to specific duties (calculated as a fixed amount per unit
(refer to Custom Tariff for the specific duties).
An excise tax, according to the current legislation, can only apply to domestically produced
goods such as molasses, Panmasala with or without tobacco, wine, beer and other alcoholic drinks,
cigarettes and cigar tobacco and cars jeeps as well as pickup vehicles. The import of these goodswhich are subject to excise tax in Nepal are subjected to an equalizing  duty equal to the excise tax that
is applied on the national goods. The objective of this measure is to provide the same treatment to
national and imported goods. Excise tax range from 15 to 40 per cent for some specific goods.
General Description of the Custom Tariff Structure
The prevailing basic customs tariff rates are 5, 10, 20, 30, and 80 per cent, and there is a
significant number of tariff lines with zero duty. However, the majority of the import items fall in the
customs duty slab of 10-20 per cent. The unweighted average customs duty rate for imports was
15.4 per cent in 1981/82. It declined to 8.8 per cent in 1992/93 and further to 8.2 per cent in 1994/95,
remaining at 10.7 per cent in 1995/96 and shift to around 11 per cent in the year1996/97.
(c) Tariff quotas, tariff exemptions
There are no tariff quotas for imports in effect in Nepal.
The current legislation provides for certain tari ff exemptions and tariff reductions, in order to
facilitate the import of specific goods on a provisional basis. These measures are taken by theWT/ACC/NPL/2
Page 18
government and published in Nepal Gazette. They are valid for all suppliers of the goods which are
specified in the Custom Tariff. The following exemptions are in effect:
(i) duty is exempted on the import of books;
(ii) customs duty is exempted on the import of equipment and vehicles for trolley bus
services;
(iii) public health projects are given a full tariff exemption on the import of medical
equipment;
(iv) import of cold storage equipment for the preservation of agricultural products including
fish and fruits is exempted from the import duty;
(v) import of alternative power development equipment is exempted from import duty;
(vi) high quality printed materials imported for the promotion and publicity of the tourism in
Nepal are exempted from the import duty;
(vii) duty is exempted on the import of threshing machine and husk-machine (Pankhi);
(viii) duty is exempted on the import of raw jute;
(ix) full exemption of customs duties is granted on the import of crates for keeping eggs,
falling under chapter 48.
For a comprehensive list of exemptions and tariff reductions, refer to Customs Tariff, Other
Provisions relating to Import Duty, Customs Tariff, pages 392 to 398 (The Customs Tariff in Englishis available at the WTO Secretariat).
(d) Other duties and charges specifying any charges for services rendered
Currently, there are no other duties and charges imposed on imports. Nevertheless, the
Customs Act of 1962 and customs regulations provide the authority to the Customs Office to charge
for the services rendered. There is a charge of 1 per cent for an import license.
(e) Quantitative import restriction including prohibitions and licensing system
All items except a few under banned and quantitative restriction as shown in Annex 3.2 are
free for import and there are no import quotas applied at present.
(f) Licensing procedure
Automatic licensing is applied for information purposes both for the import and export of
goods. Licenses are also applied for the personal baggage exceeding allowance. In addition to this, the
Treaties of Trade and Transit between Nepal and India envisage licensing in order to ensure that the
transit of goods does not violate articles 8 and 9 of the transit treaty, which embody restrictions
applied in India in the spirit of articles XX and XXI of GATT 1994 (general and security exceptions).
The Department of Commerce issues the licenses (Annex 3 presents these procedures).
(g) Other border measures, e.g., any other schemes that have border effects similar to those 
of the measures listed under (e) aboveWT/ACC/NPL/2
Page 19
There are no other border measures with effect similar to quantitative restrictions.
(h) Customs valuation
For customs purposes, the valuation processes for goods imported into Nepal are moving
towards GATT 1994 valuation rules. For this purpose the necessary amendment in the Customs Act,
1962 was made in September 1997, which adopted the transaction value method. Accordingly, the
value of goods for customs purposes will be based on the actual price paid. The owner of goods mustproduce evidence of transaction before the customs office. Further, the burden of proof lies with the
owner. In case the transaction value declared by th e owner does not match with the existing criteria of
valuation, the customs office may determine the value on the basis of the value of identical or similar
goods (refer to Gazette Notification for Customs Valuation 1997 (Marga 30, 2053) notified under the
provision of section 40 of Customs Act, 1962). This applies also to circumstances, where the owner
has not been able to declare the transaction value of goods. In determining the value of goods, HMG
may base its decision on bills or invoices submitted by the owner or on the price list presented by anauthorised agent or on the advice of experts from the fields of industry, commerce or trade. In case the
valuation of dutiable goods is fixed in foreign currency, the rate of exchange fixed by the Central
Bank determines the exchange rate to convert the value into Nepalese currency. The burden of proof
lies with the owner of the goods at all time to prov e the authenticity of the invoice, if the invoice
submitted is not satisfactory. In applying the methods of customs valuation, the customs office will betrying to base its decisions on the actual value of the imported goods, and not  arbitrarily determining
the value of goods.
(i) Other customs formalities
Under the Customs Act, 1962 and Customs Regulation, 1970, the importer or his agent has to
submit a Declaration Form along with the following documents:
(i) Import declaration form
(ii) Income tax registration certificate
(iii) Registration certificate of the commerce department for commercial imports.
(iv) Letter of credit
(v) Certificate of insurance
(vi) Packing list
(vii) Invoice
(viii) Bill of loading or airways bill
(ix) Certificate of origin
(i) Cost and transit declaration for the imports on CIF Calcutta basis.
The Customs Officer examines the goods physically against the above documents.
(j) Pre-shipment inspection
Currently, there is no system of pre-shipment inspection in Nepal.WT/ACC/NPL/2
Page 20
(k) Application of internal taxes on imports
Products imported into Nepal are subject to VAT. Domestically produced goods and imported
goods are both subject to the same taxes.
The existing sales tax rates of 10 and 20 per cent were unified at a 15 per cent rate in the
1995/96 budget. Exemptions from VAT applies basically to commodities deemed essential as food
items, kerosene, sugar, cotton textiles, medicine, pencils, and utensils made of cooper, brass, andaluminum.
HMG has replaced sales tax with Value Added Tax (VAT) at a single rate of 10 per cent in
the year 1997.  This Tax will also replace all the existing taxes on services, including entertainment
and hotel, and contract taxes. In FY 1997/98 VAT has been introduced with the rate of 10 and
20 per cent,10 per cent is levied  for those taxpayers who are registered in VAT office and those
taxpayers who do not report to the VAT office are levied 20 per cent tax in order to enhance tax
collection and discourage tax avoidance.
Municipalities in Nepal currently levy a local transit tax called octroi , which most products
are subject to, irrespective of whether they are domestically produced or imported, with a rate of one
per cent of value. As provided by the Municipalities Act, 2047, octroi is not levied on food brought
for daily use, and plants, machinery and equipment for use in industries specified by HMG as
processing materials of basic needs. The Government  is considering the elimination of this tax after
alternative  measures are adopted to replace the consequent loss of revenue of municipalities.
Cottage industries are exempt from income tax and excise duty.
(l) Rules of origin
The application for import requires the importer to state the country of origin of the goods to
be imported. Nepal is applying the rules of origin under the SAPTA agreement in order to establishwhether preferences should be applied on imported goods. In case of exports, document certifying the
origin of goods, export declaration form, invoice, letter of credit, packing list, visa for ready-made
garments for exports are required along with the application. Members of the Federation of Nepalese
Chamber of Commerce and Industry are the only authorized agencies to issue a Certificate of Origin
for certifying the export of Nepalese origin goods.
(m) Anti-dumping regime
Currently, there is no system of anti-dumping duty or any legislation to that effect in Nepal.
(n) Countervailing duty regime
Currently, there is no countervailing duty regime in effect in Nepal.
(o) Safeguard regime
Currently, there is no safeguard regime in effect in Nepal.
2. E
XPORT REGULATIONS
(a) Registration requirements for engaging in exporting
The same as for importing.WT/ACC/NPL/2
Page 21
(b) Customs tariff nomenclature, types of duties, duty rates, weighted averages of rates
The same Tariff Nomenclature HS system as approved by the WCO is used for imports and
exports.
As a general rule, exports are free from duties. As provided by Annex II of the Nepalese
Customs Tariff, only 16 products are subject to export duties; among them forest products, pulses,
ricebran, and oil cakes. Duties in some cases are ad valorem. For other products, there is a specificduty. Ad valorem export duties for these products are levied on the basis of the FOB price.
All exports, except those subject to export duties, pay a service charge of 0.5 per cent of the
export value.
(c) Quantitative export restrictions, including prohibitions, quotas and licensing systems
Products banned for exports and products under quantitative restrictions are given in
Annexes 3.1. As mentioned earlier automatic licensing is applied for information purposes for the
export and import of goods.
(d) Export licensing procedure
Except for a few banned items, all other goods fall in the free export product category.  In the
case of handicrafts, exporters have to present a certificate from the Nepal Handicrafts Association at
the customs. For the export of forest-based and wild animal products, clearance is required from the
Ministry of Forest.
(e) Other measures, e.g., minimum export pric es, voluntary export restrictions, orderly 
marketing arrangements
Export Valuation
The value of goods mentioned in the bill or invoice submitted by the exporter is regarded as
the value of such goods for customs purposes. In case the Customs Officer is not satisfied with the billor invoice submitted to him, he may determine the value of such goods on the basis of previous
records.  However, for valuation purpose for the export of garments, Customs take into consideration
the certification of valuation of garments from the Garment Association of Nepal, and for export of
handicrafts from the Handicraft Association of Nepal.
Export Payment
According to the Foreign Exchange Regulation Act, 1962 and Rules, 1963, an exporter is
responsible to realise the total payment for exported goods in terms of any convertible currency within
six months from the date of shipment from Nepal.  No export transaction can be effected on the
consignment basis. Payment for the export of any product should be made either in advance of
shipment or on the basis of irrevocable letter of credit.
Export Formalities
Any person wishing to export any goods or materials, should complete a Customs Declaration
Form as prescribed and submit it to the Customs Of ficer at the customs point of  the  country. Only
after the customs officer is satisfied that all documents and other formalities are complete can the
goods be exported.WT/ACC/NPL/2
Page 22
Foreign Exchange Act, 1962 and Rules, 1963
The exporter should declare the value of export goods in a prescribed form and submit it to
the customs officer for certification. As per the act, an exporter can receive total payment for goods
exported in terms of any convertible currency with in six months from the date of shipment from
Nepal. This rule, however, does not apply in the case of export to India because the trade between
these countries is done in non-convertible currency. The exporter has free disposition of the foreigncurrency generated by its activities.
Documents for export clearance
An exporter has to submit the following documen ts to the Customs Officer along with the
goods at the exit point :
(i) Customs Declaration Form
(ii) Invoice ( in the case of  Handicraft Products, certified by the Handicraft Association)
(iii) Packing List
(iv) Certificate of Origin from the local Chamber of Commerce
(v) Certificate of Payment or L/C received from the bank
(vi) Firm/Company Registration Certificate
(vii) Income Tax Registration Certificate
(viii) Phytosanitary Certificate for agricultural products/plants
(ix) GSP forms (in case of export to advanced countries which have unilaterally introduced
the scheme of such preferences)
(x) Foreign Exchange Declaration Form of  Central Bank
(xi) Letter of Authority to clear the consignment
(xii) Visa authorization certificate from the Garment Visa Office of the National Productivity
and Development Center of the Ministry of Industry in case of export of garments to
UNITED STATES and Canada
(xiii) Certificate from the Department of Archaeology for the export of status, arrangement
works, carvings of archaeological value, etc.
HMG expects that after joining the WTO, all restrictions on the export of garments and other
textile products will be gradually abolished in accordance with the agreement reached by country
Members in the Uruguay Round.
(f) Export financing, subsidy and promotion policies
Earnings from export transactions are free from income tax. Trade promotion activities are
carried out through the Trade Promotion Centre, which organizes seminars/conference and providesmarket information to the interested parties.WT/ACC/NPL/2
Page 23
(g) Export performance requirements
There are no export performance requirements either for Nepali producers or for foreign
entrepreneurs.
(h) Import duty drawback system
The Industrial Enterprises Act has the provision of refunding the customs duties/if any, sales
tax (VAT), and excise duty levied upon raw materials used by any industry in connection with itsproducts for export. Such reimbursement should be ma de within sixty days after an application to that
effect has been duly submitted. No reimbursement is made if the application is not submitted within
one year from the date of export. Industries producing intermediate goods that are utilized in the
production of exportable goods are also entitled to the reimbursement of duties and taxes levied on
raw materials.
3. I
NTERNAL POLICIES AFFECTING FOREIGN TRADE IN  GOODS
(a) Industrial policy, including subsidy policies
Nepal follows a general policy of promotion of investments in all sectors of economic
activity. The Foreign Investment and Technology Transfer Act 1992, the One Window Policy 1992,
and the Industrial Enterprises Act 1992 apply to the industrial sector, primary sector as well as to
services. These policies and acts aim at making the environment and industrial investment congenial,
straightforward, encouraging, and transparent. Some of the distinctive features of current policies are:(i) non-discriminatory treatment for both local and foreign investment;  (ii) simple and
debureaucratised administrative procedures; (iii) sound and lucrative incentive package; and (iv)
quick and efficient One Window Service.
 Subsidy policy is designed to improve the economic security of the poor. Nepal provides
subsidies in food, fertilizers, transport, irrigation, and credit. With the introduction of the structuraladjustment programme, expenditure on subsidy  programme has been reduced. Agricultural credit
subsidies aim at providing incentives for agricultural investment. Subsidized agricultural credit is
channelled through the Agricultural Development Bank (ADB) in order to increase investment in
agriculture. Transport subsidies are provided to comp ensate the high cost of transport of food grains
and fertilizer to the hills for the purpose of social safeguards.
As per the general policy of market oriented economic policy and liberalization, and in order
to develop sound commercial practices in the import and distribution of chemical fertilizers, a
fertilizer unit has been established under the Monitoring and Evaluation Division of Ministry of
Agriculture. Under this new arrangement, the private sector is encouraged to participate in the supply
of fertilizers.
However, for the current fiscal year (1997/98), HMG has decided to provide NRs 4,198
(US$66) per metric ton to the importers who have al ready opened letter of credit and have declared to
import before 055/2/4 (July-Aug 1998). But the govern ment still holds a policy of gradual slashing of
subsidy on fertilizers to zero. Besides, the government has provision for subsidy on seeds and plants.
Furthermore, there is a provision also for subsidy on pipe and pumping sets intended for use in
irrigation.
(b) Technical regulations and standards, including measures taken at the border with 
respect to imports .WT/ACC/NPL/2
Page 24
The Bureau of Standards and Metrology is the office responsible for all products except for
health and food products. Standards and technical regulations are approved by the Nepal Council of
Standards headed by the Ministry of Industry. The Bureau is responsible for the implementation of the
Standards, Weights and Measurement Act, and the Quality Certification Mark and Rules Act. The
Bureau is the body corresponding to the international organization for legal metrology and to ISO.
In drafting standards and technical regulations, when possible, international standards and
regulations are used. Draft standards and technical regulations are submitted for review to the relevant
national institutions. When approved by the Council, they are published.
Nepal relies more on standards than on technical regulations. There is a very limited number
of technical regulations that apply basically to raw wool, cement, iron bars, mineral water, and LPG
cylinders. In the case of wool, it applies to guarantee the quality of Nepalese carpet exports; in other
cases it functions on the basis of consumer safety.
Standards and certification
Import of plant and plant products has to meet the standards laid down by the Division of the
Plant Protection of the Department of Agricultu re. The Division examines samples of the non-food
item before a permit is issued by the customs for import.
(c) Sanitary and phytosanitary measures, including measures taken in respect to imports
Food items should meet the conditions prescribed by the Food Research Laboratory. After
standards of goods imported into Nepal are found well within the conditions laid down, permit is
issued to importers.
Medicines imported into the country should comp ly with the standards laid down by the
Ministry of Health.
The export and import of plant and plant materials such as seeds, saplings, and seedlings are
subjected to phytosanitary measures at the border checkpoints and at the Tribhuvan International
Airport, Kathmandu as per the Plant Quarantine Act 1972 and Plant Quarantine Rules 1975. These
materials are examined for the possible presence of any obnoxious or restricted pathogens, biotic
agents, and weed seeds on the basis of the items listed in the act and rules which are periodically
updated following the recommendations of the Regional and International Plant Quarantine
conventions and the findings of national surveys and surveillance. At present, seven plant quarantine
checkposts including one at the International Airport, Kathmandu are in operation. These checkposts
are under the jurisdiction of a central level Plant Quarantine Section of the Plant Protection Division
in the Department of Agriculture.
Similarly, the existing Contagious or Infectious Disease Act, 1963 authorizes the government
to intercept any person, animal, animal products, and feeds suspected of carrying an infectious disease
or agent at entry points. Such a person and animal may be hospitalized or isolated for "examination
and control" as per the act. At present, there are 24 animal quarantine checkposts located at the border
areas, coordinated and administered by the central levels. A separate act governing the Animal
Quarantine and Veterinary services is in the process of enactment.
Minimum standards or specifications have also been fixed for certain categories of
agricultural products (food products—processed and unprocessed) and animal feeds under the FoodAct, 2023 (1967) and Food Rules, 2027 (1970) and the Animal Concentrate Act, 1976 respectively.
The export and import of such products must comply with these fixed standards. The responsibility to
implement these laws lies with the Central and Regional Food Laboratories in association with theWT/ACC/NPL/2
Page 25
local administration. Very recently, His Majesty's Government of Nepal has pesticides Act, 1991, and
pesticides Rules, 1994 to regulate the export and import of pesticides with a view to protect the
environment and ensure sanitary measures. These acts and rules authorize the Ministry of Agriculture
to ban and/or restrict any public pesticides that are potentially hazardous to health.
For Drug Policy and Regulatory Service, HMG constituted the Department of Drug
Administration in 2036 (1989 AD) and assigned to it the responsibility of implementing the Drug Act,
2035 (1978) and the Drug Rules, 2038 and 2040.  The department with the aid of various regulations
has been implementing the provisions of the act.  In accordance with the objectives of the "Health for
all" and to improve and manage coordination among the governmental, non-governmental and private
organizations involved in the activities related to drug production, import, export, storage, supply,
sales, distribution, quality assessment, regulatory control, rational use, and information flow, the
National Drug Policy 1995 has been promulgated and is being implemented.  It has put its emphasis
upon maintenance safeguarding and promotion of the health of people by making the country self-reliant in drug production; ensuring the availability of sale of effective, standard, and quality drugs at
affordable price in quantities sufficient to cover the need of every corner of the country, and to cover
effectively all the drug-related activities including production, import, export, storage, safety, supply
and distribution in the country.
(d) Trade related investment measures
None
(e) State trading enterprises
There are some State-owned enterprises that play a substantial role in the trade of important
import and export products of Nepal. However, these companies except one have not been granted
any exclusive or special rights or privileges, including statutory or institutional powers through theexercise of which they influence the level or direction of imports and exports. However, their
purchases or sales represent a substantial part of trade in the respective goods and obviously may not
be neglected in analysing the market situation of the respective products.
The State-owned enterprises in Nepal are independent entities under the general supervision
of the concerned ministries. They have been established essentially with the objective of ensuringadequate supply of raw materials and essential goods. These enterprises operate on commercial
considerations and provide equal opportunities for all suppliers. The government has made statutory
provisions for transparency and cost-consciousness in the operations of these enterprises. For
example, they are obliged to call for at least three quotations for procurement and adopt competitive
bidding for any contract.
The information on the following enterprises should not in any way be interpreted as defining
them as State-trading ones with exclusive rights or privileges:
(i) Nepal Food Corporation mainly procures food grains to stabilize prices and supply of
food grains in deficit area.
(ii) National Trading Limited imports essential goods such as cement, sugar, clothes, and
iron rods with a view to stabilize price.
(iii) Nepal Oil Corporation imports aviation fuel, furnace oil, LP gas, diesel and kerosene.
(iv) Salt Trading Corporation imports salt and sugar. (Government share is offered for sale.)WT/ACC/NPL/2
Page 26
(v) Agricultural Input Corporation imports fertilizers and agricultural inputs essential to
farmers. Now the Government has published a new policy, which opens the door to the
private sector to import fertilizer and agricultural inputs essential to farmers.
(vi) Cottage & Handicraft Emporium imports handloom and knitting machinery and cotton
and synthetic yarns for cottage industries.
(vii) Nepal Coal Company imports coal for manufacturing firms . (underway to liquidation)
(viii) Nepal Transit and Warehouse Company functions as an autonomous body responsible
for clearing and forwarding cargo.
Of the above-mentioned enterprises, only the Nepal Oil Corporation enjoys monopoly over its
services.  All other enterprises must compete with the market.
(f) Free zones
None
(g) Free economic zones
No export-processing zone has yet been established.
(h) Trade related environmental policies
Some export restrictions have been put into effect for the export of wildlife forest products to
protect wild life and the forests.
(i) Mixing regulations
None.
(j) Government-mandated counter-trade and barter
No government enforced provisions are in effect in Nepal.  However, border inhabitants along
the border with Tibet, Autonomous region of China, trade in barter to some extent.
(k) Trade agreements leading to country - specific quota allocation
There is no agreement which provides specific quota allocations for the import of any product
from any country. However, the agreement with Indi a guarantees for Nepal the supply of minimum
viable quantities of some basic products (cotton, coal, sugar, etc.) in times of scarce availability and
supply. Under the current trade agreement with India, Nepal imports some goods on a quota base
(cotton, baby food, milk and sugar etc.).
(l) Government procurement practices, including general legal regime and procedures for 
tendering, dealing with tenders and award of contracts
Government procurement is governed by the Financial Administration Regulation. Tenders
should be published in the newspapers providing sufficient time up to three months before the
commencement of the contract. In applying for the tender Nepalese citizens have to deposit up to5 per cent of the tender value and foreigners 10 per cent. A Nepalese contractor can deposit the
amount for tender in three instalments. A Nepalese contractor who has won the tender has to furnishWT/ACC/NPL/2
Page 27
security up to one-third of the tender value depending on the class of the contractor. A foreign
contractor has to deposit one-fourth of the value of the contract applied for. The security may be in the
form of immovable property, bonds or cash deposit.
Contractors pay a value added tax.
A foreign contractor does not have to pay value added tax in the following circumstances:
(i) if the contract is for the delivery of services to a person residing abroad;
(ii) if the contract is for the export of goods from the kingdom to an agency abroad.
In procurement of the goods, government of fices should follow the following rules:
(i) goods up to US$80 can be procured directly from the market;
(ii) goods above US$80 up to US$800 can be purchased on quotation. At least five
quotations must be submitted by registered firms;
(iii) goods above US$800 should be purchased through sealed tender with at least three
participants.
(iv) construction goods up to US$2.4 thousand can be purchased on quotation.
The above provisions shall not be applicable in the following circumstances:
(i) purchase of goods from the foreign government or from foreign government enterprises;
(ii) purchase of goods under bilateral or multilateral intergovernmental agreements;
(iii) purchase of goods from the authorized agent of a company in which government equity
exceeds 50 per cent.
Procedures may be simplified when usually there are not many suppliers for a specific
product. In this case, upon recommendation of a special Valuation Committee under the Ministry of
Industry products can be bought in the following ways:
(i) in case it is certified that there are no other industries except the one in the area goods
can be purchased without a tender;
(ii) ministries can keep lists of well-known foreign dealers and manufacturers. In special
circumstances, goods can be bought from them  directly through sealed quotation, but the
latter has to be approved by a special committee formed under the Ministry;
(iii) the government can request for quotation at least from five firms and purchase goods
from a firm which offers goods at the lowest price.
Designs, specifications, norms, and rates concerning projects need to be approved. Cost
estimates for these projects are examined by a group of senior technicians. Then the approval has to
be sought from the following officers:
(i) up to US$39,682.50 from the class three gazetted officer.
(ii) up to US$79,365.07 from the class two gazetted officer.WT/ACC/NPL/2
Page 28
(iii) up to US$0.1587 million from a class one gazetted officer.
(iv) up to US$0.4755 million from the Regional Director.
(v) above US$0.4755 million  from the Departmental Head.
In special circumstances the ministries may offer public works on contract to any qualified
party.
When inviting tenders, cost estimates up to US$47,620 need to be published giving
information on construction materials, rates, etc. Contingency and overhead costs will not be included
in this amount.
Prior to the invitation of tender for public works or heavy equipment above US$0.1587
million, pre-qualification (PQ) application will be sought from classified contractors. Contractors are
classified into four categories depending on their financial and technical capacity. The criteria for
classification are specified in the Contractors Classi fication Act. The duration for the submission of an
application for pre-qualification will range from 30 to 90 days. Tenders could be invited fromcontractors fulfilling the conditions laid down in the pre-qualifications. Time for the submission of
tender will be 15 to 80 days.
Participants in tenders should provide the following information to the government:
(i) agent/representative appointed in Nepal;
(ii) the name and address of the agent or representative;
(iii) the amount/rate of commission; and
(iv) any other terms agreed upon between the foreign company and the agent.
Contracts up to US$0.7935 million for the goods and services of Nepal origin and
construction work should be given to Nepalese citizens. Approval would be necessary from the
ministry if such contract is to be awarded to foreigners.
(m) Regulation of trade in transit
Traffic in transit destined for third countries is allowed to operate through 15 routes on Nepal-
India border. To facilitate transit cargo further, a Transit Treaty has been signed between HMG of
Nepal and the Government of the Republic of India. Both have agreed to provide the points of entry,
exit as well as storage facilities for the safe and speedy movement. Further, two additional routesnamely, Radhikapur and Phoolbari, for Nepal's Trad e with and through Bangladesh has also been
allowed for its trade. Specific provisions of this treaty are as follows:
Traders have to comply with transit procedure as specified in the Treaty. Exporters fill out
Customs Transit Declaration  form (CTD). After a check, the Indian Custom Officer at the border
shall endorse all the copies of CTD.
With respect to export, an exporter or his agent fills up a Customs Transit Declaration form.
The exporters are required to fill up four copies of Customs Transit Declaration (CTD) which should
be presented to the Customs house. The original copy shall be handed over to the exporter and the
duplicate and triplicate will be sent by post to the Collector of Customs office, Calcutta. In order to
avoid delay in postal transmission, duplicate and triplicate copies of the CTDs shall be handed over toWT/ACC/NPL/2
Page 29
the exporter or his authorised representative in a sealed cover, if he so desires. These facilities shall
however be denied to the exporter who defaults in the production of these documents within a
reasonable time to the Indian Border Customs Office.
Goods moving by rail and road are covered by an insurance policy. Recently, under a Letter
of Exchange between Nepal and India, the Indian customs authorities posted at Seaport/ Border Land
customs Stations, as the case may be, shall merely check the one-time lock of the container put on bythe shipping company, and if found intact, shall allow transportation of the containerized cargo both
on import and export moving to and from Seaports and Land customs Stations in India. The Customs
Officer at Calcutta and Land customs Stations check goods under locks and seals in order to insure
that they have not been tampered with.
With respect to imports, an importer or his agent fills up a Customs Transit Declaration
forms. The importers are required to fill up six copies of Customs Transit Declaration (CTD) which
should be presented to the Customs house. The original copy shall be handed over to the importer.The duplicate and triplicate will be sent by post to the Indian boarder customs officer and the
remaining copies shall be retained by the Customs house. In order to avoid delay in postal
transmission, duplicate and triplicate copies of the CTD along with copy of the original railway
receipt shall be handed over to the importer or his authorised representative in a sealed cover, if he so
desires. These facilities shall however be denied to the importer who defaults in the production ofthese documents within a reasonable time to the Indian Border Customs Office.
In order to facilitate the transit of containerised traffic Nepal and India have exchanged letters
in December 1996 for simplifying the relevant custom procedures for such traffic. This exchange of
letters is a good basis for the expeditious development of multimodal transport arrangement and
facilitation of transit of Nepalese goods through India.
4. P
OLICIES AFFECTING FOREIGN TRADE IN AGRICULTURAL PRODUCTS
General Background
Agriculture, which is the dominant sector of the Nepalese economy contributing more than
40 per cent to GDP (cu rrent price) at factor cost (FY 1995/96), is basically a private sector activity in
which the government plays a supportive and facilitating role to enhance agricultural production andproductivity.
Nepal imports significant quantities of high value agricultural products such as fruits,
vegetables, livestock, and processed products mainly from India. The import of foodgrains, however,
is made only during drought years.
Nepal's major export items comprising basically of agricultural products include maize,
mustard, ghee, ginger, pulses (lentil and gram), broom grass, live animals, wheat flour, oil cake, jute,
fresh vegetables and vegetable seeds, orthodox tea, niger seeds, hide and skin, rice bran, vegetable oil,
spices, cardamom, and fruits.
In the fiscal year 1997/98, HMG has allocated NRs. 600 million (US$10 million approx.) for
subsidy on the import and transport of chemical fertilizers and US$12.7 thousand have been allocated
to subsidize for soil tests to be carried out on the request of farmers to establish the best crop for their
plant of land.
(a) ImportsWT/ACC/NPL/2
Page 30
In imports, the phytosanitary measures as described earlier are in place. There are generally
no major prohibited items in the import of agricultural products. A few restricted items, however, and
the underlying reasons thereof have been presented in the table below:WT/ACC/NPL/2
Page 31
Restriction on import of agricultural products
Items Reason
Citrus sapling/ plants To prevent citrus decline syndrome as per PQ Act
1972
Bread fruit plants To prevent citrus canker disease as per PQ Act 1972
Potato tuber from Indian wart-affected
areasTo prevent wart disease as per PQ Act 1972
Lathyrus sativus Because of high content of BOAA (B-N-
Oxalyl/Amino-L-Alanine) responsible for causing
Lathyrosis diseases (published in Nepal
Gazette ,1992)
BVO containing drinks For health reason (Food Act, 1967)
DDT, Methyl parathion For reasons of health and environment protection
(Public Enterprises Act, 1991)
Beef For religious reasons
As per the provision of the treaty of trade with India, 14 groups of agricultural  products have
been listed under the preferential treatment for duty-free entry on a reciprocal basis. These products
take account for more than 50 per cent of both Nepalese imports and exports to and from India. Other
unlisted items are subject to concessional duties.
(b) Exports
Agricultural products, apart from the two major export items – carpet and ready-made
garments, make the bulk of other exports of Nepal. To India Nepal exports mainly jute goods, pulses,
hides and skins, and cardamom. To overseas countries, pulses, niger seeds, goats skin, woollen goods,
and hides are the major exports.
(c) Export prohibitions and restrictions
The prohibitions or restrictions on export of agricultural commodities are listed with reasons
in the table below.
List of Agricultural Products Restricted for Export
Item Reason
Raw wool For protecting local wool processing establishments
Seeds Export and import of only notified seeds as per the Seed
Act, 1988 to maintain seed quality
(d) Export credits, export credit guarantees, etc.
There are no specific incentives for the export of agricultural commodities. The government,
however, facilitates the exporters by providing market information and easy access to foreign
exchange as a general policy. For this purpose, the government provides to exporters technical
facilities of opening foreign currency account out of the income generated from export. Information-oriented services available for exporters are not subsidy-type facilities.
(e) Internal policiesWT/ACC/NPL/2
Page 32
The government has been fixing the minimum support price for rice, sugarcane, tobacco, and
cotton. The Ministry of Supplies announces support price for rice, where as the support prices for
other commodities mentioned above are determined and executed by the commodity/management
committees of the State-owned enterprises concerned, described under Section IV. 3 (f).
In the case of fertilizers, there is a price subsidy on urea. On other fertilizers, the price subsidy
was eliminated in 1993. In the hilly districts, there is a transportation subsidy on fertilizers. Theprivate sector is also engaged in fertilizer procurement and has excess to fixed amount of subsidy on
urea import.
Production of Principal Agricultural Commodities and Livestock
S. No. Item Unit 1993/94 1994/95 1995/96 1996/97
1. Food grains ‘000 MT
Paddy 3,496 2,906 3,579 3,711
Maize 1,254 1,302 1,331 1,317
Wheat 899 942 1,013 1,072
Millet 246 253 282 289
Barley 35 37 41 37
2. Cash Crops
Sugarcane 1,293 1,469 1,569 1,629
Oilseeds 108 116 116 119
Potato 749 839 898 997
Tobacco 6564
Jute 11 12 15 14
Pulses 195 202 215 223
3. Livestock
a. Meat
Buffaloes MT 100,383 104,070 104,830 113,482
Mutton/Goat MT 33,757 33,975 34,900 37,450
Pig MT 10,642 11,027 11,800 12,374
Poultry MT 9,561 9,676 9,990 10,962
Fish MT 16,549 21,180 21,879 23,200
b. Milk '000 MT 919 941 962 1,012
c. Eggs No. '000 378,079 383,122 396,400 421,460
d. Wool MT 621 625 618 624
Source : Ministry of Agriculture and Central Bureau of Statistics, HMG.
5. P OLICIES AFFECTING FOREIGN TRADE IN OTHER SECTORS
(a) Textile regime
It is a labour-intensive industry. US is the major export market for textile products. The
government has adopted the following policies with respect to textiles :
Diversify ready-made garment market.
Distribute quota export of textile products under the agreement with the US on the first come
first serve basis.WT/ACC/NPL/2
Page 33
Provide duty drawback and bonded warehousing facilities in the import of raw materials for
the garment exporters.WT/ACC/NPL/2
Page 34
(b) Policies affecting foreign trade in other major sectors
Carpets
It is a major foreign exchange earning and labour intensive industry. Germany is the major
export market for carpet. Under MOC there is a committee for the development and facilitation of the
export of Nepalese carpet named Carpets and Wool Development Council with representation from
government and non-government agencies. The government has adopted the following policies withrespect to carpet :
(i) to increase value addition;
(ii) to diversify the market in accordance w ith the needs of the international buyers;
(iii) to make carpet industry environment-friendly.
Provide duty drawback and other facilities for the exporters through one-window system.
Leather
The export of finished leather is going to be progressively promoted. The government has
already announced a ban on the export of wet blue skin from 2006/07 onwards.  For the period
between 1996/97 and 2005/06, an export ratio for each year has been fixed separately for wet blue and
crushed/finished skin. The exporters of leather are required to export their products as follows:
Export Ratio for Leather Products (1996/97-2005/2006)
Fiscal Year Crushed or
finished product(%)Wet blue skin
(%)
1996/97-1997/98 15 85
1998/99-1999/2000 30 70
2000/2001-2002/2003 50 50
2003/2004-2005/2006 75 25
V TRADE - RELATED INTELLECTUAL PROPERTY REGIME
1. G ENERAL INTRODUCTION
(a) Intellectual property policy
The policy objective of the His Majesty’s Governme nt in this area is to provide effective and
adequate protection to all categories of intellectual property in conformity with the provisions of theAgreement on Trade-Related Aspects of Intellectual Property Rights. Industrial property rights
legislation has already been drafted and is in the process of enactment.
(b) Agencies responsible for policy formulation and implementation
The formulation of industrial property policy and necessary regulations is under the purview
of the Ministry of Industry. The implementation and execution of the policy and regulations are theresponsibility of the Department of Industry (DOI) within the ministry and thus it is the Patent Office
of the country, possessing executive power and a quasi-judicial status. Under the existing law, the
Nepal National Library is the authorised agency to register intellectual property other than industrialWT/ACC/NPL/2
Page 35
property. Recently, the Government has delegated its authority of administering copyrights to the
Youth, Sports and Culture Ministry. The Ministries  of Industry and Youth, sports and Culture are
responsible, in the last instance, for the enforcement of intellectual property rights.
(c) Membership of international intellectual property conventions and of regional or 
bilateral agreements
Effective from 4 February 1997 Nepal has become a formal member of the World Intellectual
Property Organization (WIPO). Recently, Nepal has also signed a Cooperation Agreement with the
European Union (EU) that incorporates provisi ons on intellectual property. (Act 4, Cooperation
Agreement between Nepal and the EU).
(d) Application of national and m. f. n. treatment to foreign nationals
Nationals of other countries are accorded no less favorable treatment than the one accorded to
Nepalese nationals. With regard to protection of intellectual property, nationals of any country are
accorded the same treatment. Both national and foreign citizens have to register the brand,trademarks, patent, and art work with the responsible agency. If foreigners have already registered an
industrial property in their countries, the Department of Industry may not conduct any inquires if such
application is filed for registration along with certificates of their registration in the country of origin.
(e) Fees and taxes
There are no taxes on intellectual property and fees are nominal. Refer to chart:
Registration and Renewal Fees (w e f. 16 July 1996)
S. No. Particulars of Fees* Patent
(NRs.)Design
(NRs.)Trademark
(NRs.)
1. Application   1,000     500       500
2. Application Amendment      200     200       200
3. Registration   5,000   2,000    1,500
4. Transfer of Ownership   2,500   1,000       750
5. Endorsement and Recording other than
Transfer of Ownership  1,000      500      500
6. Details of Registration     500     500     200
7. Opposition and Case Filing     500     200     200
8. Copy of Registration Certificate   1,000     500     500
9. Renewal (Annual Rate)
a.  For the First Term
b.  For the Second Term
c.  Perpetual Annual Rate  2,000
  4,000
       -    400
    800
      -      -
      -
    200
* Above mentioned fees are for the Nepalese nationals. Foreigners have to pay double the rate indicated
above except for penalty charge. Foreigners are required  to make payments in convertible foreign currency.
2. S UBSTANTIVE STANDARDS OF PROTECTION INCLUDING PROCEDURES FOR THE ACQUISITION 
AND MAINTENANCE OF INTELLECTUAL PROPERTY RIGHTS
(a) Copyright and related rights, including rights of performers, producers of phonograms, 
and broadcasting organizationsWT/ACC/NPL/2
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Copyright and related rights are covered by the Copyright Act, 2022 (1965).   Under this act,
a person shall acquire a copyright only on the works registered pursuant to the act.  For the purpose of
the act, the term 'work' means literary works such as article, essay, story, poem, novel, epic, etc., and
artistic works like drama, cinema, drawing, ma p, photograph, musical notation, sound record and any
other work relating to literature, art, and music.
The copyright of any work registered under the act shall be valid throughout the life of the
person in whose name it is registered and shall continue for fifty years after his/her death. In the case
of a work registered in the name of two or more persons, the copyright shall be valid only for a period
of fifty years after the death of the person who ever dies first among them. The copyright act provides
license provisions for publication, translation, exhibition, and for public library purposes.  The act
also provides punishment and imposes fines if any works are published or copied without obtaining
licence from the copyright holder or contrary to the terms and conditions of the licence or import into
the kingdom.
(b) Trademarks including service marks
Trademarks, including service marks, are covered by the Patent, Design and Trade Mark
Act 2022 (1965). Any person wishing to have trademark of his business registered should submit to
the Department of Industry an application according to the specimen form indicated in
Schedule I(c)of the Act, along with four copies of such trademark. After completing this process thedepartment will register such trademark in the name of the applicant and then issue him/her a
certificate. If the trademark filed for the registration is observed to be hurting the prestige of any
individual or institution, or adversely affect publ ic conduct or morality, or undermine the national
interest, or the reputation of the trademark of any other person, or in case such trademark is found to
have already been registered in the name of another person the registration can be denied. Servicemark is also subject to the same rule. The act pr ovides for exclusive rights for the person who has
registered the trademark or service mark. Trademarks and service marks are initially registered for a
period of  seven years, and they can be renewed for an indefinite number of years after every
seven-year interval.
(c) Geographical indications, including appellation of origin
The Patent, Trademark and Design Act, 1965 do es not contain any provision on geographical
indication including appellation of origin.
(d)  Industrial design
Industrial designs are covered by the Patent, Design and Trademark Act, 2022  (1965). Any
person desirous of having the design of any article to be protected should submit an application to theDepartment of Industry along with the specimen as indicated in Schedule 1 (b) of the Act, together
with four copies of such design and maps, and drawings and particulars thereof. On receipt of such
application, the Department will register the desi gn in the name of applicant and issue him/her a
certificate. In case such design hurts the prestige of  any individual or institution, or adversely affects
public conduct or morality, or undermines the national interest, or in case such design has already
been registered in the name of any other person, registration can be denied. Industrial designs are
initially registered for a period of five years and can be renewed for two more terms at an interval offive years.
(e)  Patents
Patents are covered by the Patent, Design and Trademark Act, 2022 (1965). Any person
desirous of obtaining rights over any patents should register such patents in the department by fillingWT/ACC/NPL/2
Page 37
in an application according to the specimen specif ied in Schedule I(a) containing the particulars
mentioned below along with the evidence available on the following in his possession:
(i) name, address, and occupation of the person inventing the patent;
(ii) if the applicant himself/herself is not the inventor, how and in what manner he has
acquired the title for the invention;
(iii) process of manufacturing, operating or using the patent;
(iv) the theory or formula, if any, on which the patent is based.
 Along with the application, the applicant s hould also submit maps and drawings along with
particulars of the patent as well as the fee specified in Schedule 3. On receipt of such application, the
department will conduct investigations or studies to ascertain whether the patent mentioned in the
application is a new invention and thereafter decide whether or not to register such patent.  If it is
found to be a new invention, the department will issue a registration certificate according to the
specimen form indicated in schedule 2(a). In  case of patents registered in other countries, DOI willaccept the examinations conducted for the granting of the patent in that country. The department can
deny registration of patent under the act in the following circumstances:
(i) in case the patent is already registered in the name of any other person;
(ii) in case the applicant himself is not the inventor of the patent or he has not acquired the
rights from the original inventor;
(iii) in case the patent sought to be registered is likely to adversely affect public health,
conduct or morality or the national interest; and
(iv) in case the registration of the patent will constitute a contravention of the existing Nepal
law.
Patents are registered for an initial period of seven years and then can be renewed for two
more periods of seven-year intervals. No invention is explicitly excluded from patentability.
(f) Plant variety protection
The Patent, Design and Trademarks Act, 1965 does not contain any provision on protection of
plant variety.
(g) Layout designs of integrated circuits
The Patent, Design and Trademarks Act 1965, does not cover layout designs of  integrated
circuits.
(h) Requirements for undisclosed information, including trade secrets and test  data
The Patent, Design and Trademarks Act does not have any provision in this respect.
(i) Any other  categories of intellectual property
None.
3. M
EASURES TO CONTROL USE OF INTELLECTUAL PROPERTY RIGHTSWT/ACC/NPL/2
Page 38
 No specific measures, or legislation to control the use of intellectual property rights are
currently in effect.WT/ACC/NPL/2
Page 39
4. E NFORCEMENT
(a) Civil judicial procedures and remedies
The Department of Industry is empowered to issue any order or make decision in the
execution of Patent, Design and Trademark Act, 1965. Any person not satisfied with an order or a
decision of the department may file an appeal to the local Appellate Court within 35 days of such an
action. The court thereupon proceeds with the case under the Judicial Administration Act 2048 (1991)and the Appellate Court Rules, 2048 (1991). The court starts judicial proceedings under the Summary
Trial Act, 2028 (1972). Normally, the court has to finalise the case not later than 90 days of the
receipt of the case file. The court may confirm or defer fully or partly the order issued or decision
made by the department or make any order justified. Besides, if the case demands, it may issue order
of mandamus or injunction. The Supreme Court has also been empowered to hear an appeal, or
review, or make a revision of the judgement made by the Appellate Court in rare instances, in case
there are material differences in decisions between the department and the court, or if some seriousmistake in the interpretation of the constitution and law has been caused, or the precedents made by it
have been ignored or wrongly interpreted.
But in the case of copyright, an appeal lies on HMG (Ministry of Youth, Sports and Culture)
against any order issued or decision made by the Registrar within 35 days. The time limitation to file a
suit against infringement on copyright is six months from the occurrence of such an event. Casesunder Copyright Act, 1965 are also to be processed under summary trial.
The current legislation provides for the following remedies:
(i) any abuse of patent right is punishable under this act with a fine not exceeding US$32 as
well as confiscation of all articles or goods connected with such offence on the order of
the department;
(ii) any abuse of design is punishable with a fine not exceeding US$13, as well as
confiscation of all articles and goods connected with such offence on the order of the
department;
(iii) abuse of any trademark is punishable with a fine not exceeding US$16 as well as
confiscation of all articles and goods connected with such offence on the order of thedepartment.
The Department of Industry, an agency responsible for administration of patent, trademark,
design, and other industrial property, pursuant to the act, may impose a reasonable amount of fine on
the loss incurred through the violation of registered patent, design, and trademark by anybody, to be
paid to the person who has really suffered from such loss and in whose name the patent, design or
trademark was registered, by the person involved in such violation, as a compensation.
(b) Provisional measures
The law in the enforcement of these acts provides no provisional measures.
(c) Any administrative procedures and remedies
No extra administrative procedures and remedies are available other than those expressly
provided above.WT/ACC/NPL/2
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(d) Any special boarder measures
Importation of unauthorized (unlicensed or breaching the terms and conditions of license)
copies of publication (except a single copy for personal use) is prohibited. Contravention of such
restriction will lead to confiscation of such unauthorised copies and a fine of NRs. 100/- to 500/-. The
owner of a copyright may recover damages from the person importing knowingly such an
unauthorized publication.
After due process, the courts can provide for broader measures.
(e) Criminal procedures
Cases of Copyrights, Patents, Designs, and Tr ademark, do not fall under criminal procedures
since they are treated as civil cases.
For residents, fees and charges are just half of those for non-residents except for penalty
charge. Non-residents are required to make payments in convertible foreign currency.
5. L AW DECREES , REGULATIONS , AND OTHER LEGAL ACTS RELATING TO THE INTELLECTUAL 
PROPERTIES MENTION ABOVE
(i) Patent, Design and Trademark Act, 2022 (1965)
(ii) Copyright Act, 2022 (1965)
(iii) Copyright Rules, 2046 (1989)
(iv) Actions taken by the Department of Industry.
6. S TATISTICAL DATA ON APPLICATION FOR AND ON GRANTS OF INTELLECTUAL PROPERTY 
RIGHTS AS WELL AS ANY STATISTICAL DATA ON THEIR ENFORCEMENT
By mid 1997 some 11,000 trademarks have been registered in Nepal of which 2,000 have not
been renewed. There have been very few applications for patents. Only around 50 patents have been
granted.
VI. TRADE-RELATED SERVICES REGIME
1. G ENERAL INTRODUCTION
The service sector in Nepal has witnessed significant growth over the last two decades. It
accounts for 32.3 per cent of GDP and provides employment to almost 18 per cent of the total labour
force. In 1985 the service sector accounted for 26 per cent share in GDP, evidencing the growth of
this sector over the years.
During the period 1991-95 the service exports from Nepal amounted in average to
US$200 million a year. Nepal is a net service exporter. The introduction of open and liberal policies,
combined with full convertibility on current account transactions, explains the significant growth of
the service sector. However, the contribution of the Nepalese service sector to the total invisibleexports is the lowest in South Asia.
Different public enterprises of services are available in Nepal such as business, transport and
communication, distribution, educational, environmental, financial, health-related, social, tourism,WT/ACC/NPL/2
Page 41
and travel related services, and recreational and sporting services. Due to the keen interest of the
government in road development, transport services have grown significantly. Recently, the open and
liberal policy has transformed the financial sector as a leading service sector in Nepal. However, there
is still a miserable paucity of data pertaining to the nature, type, and size of the existing service sector
in the country, Hence, information on the sector  used in this Memorandum is mostly qualitative.
Quantitative data, where available, are provided.
The following paragraphs describe the overall market and regulatory structure of the principal
service sectors in Nepal. The enumeration of the Services Sectarian Classification List, in Annex 7 of
WT/ACC/1, has been followed.
I. Business Services
1. Professional Services
(a) Legal services
As provided by the Foreign Investment and Technology Act, 1992 (FITT, 1992), no
permission is granted for making foreign investment in the legal services. The provision of legal
services (consultancy ) in Nepal is governed by the Nepal Bar Council Act, 2050 (1993). According to
the act all legal practitioners must be registered with the Bar Council to exercise the profession. The
Bar Council grants the licence to practice law in th e country. Only Nepalese citizens who have passed
the Legal Practitioner Examination can be registered with the Bar. The Bar Council takes theexaminations. There are three public enterprises of legal practitioners in Nepal: (i) senior advocate,
(ii) junior advocate, and (iii) assistant junior advocate. There are different requirements to be met to
be registered in each one of these categories of legal practitioners. The Supreme Court confers the title
of Senior Advocate. It can be granted after 15 years of practising the legal profession in Nepal.
(b) Accounting, auditing and bookkeeping servicesAccounting, auditing, and bookkeeping services in Nepal are ruled by the FITT Act, 1992,
and by the Nepal Chartered Accountants Act, 2053 (1997). According to the FITT Act, 1992, no
permission is granted for the establishment of foreig n enterprises, or for foreign investment, in the
accounting business. The Nepal Chartered Accountants Act provides for the establishment of the
Institute of Chartered Accountants of Nepal, an autonomous body that works as a regulatory body forthe accounting and auditing services, as well as for the setting service conditions of the professionals.
This Act enacted for the promotion of auditors service, provides for the establishment of an
autonomous body called "The Institute of Chartered Accountants of Nepal". The Institute works as a
regulatory body for promoting the audit services and service conditions of audit professionals. A
council as a central body is responsible to look after the affairs of the Institute. The council ismandated, among other things, to conduct examination for those entering the audit profession, issue
license to them, provide membership of the instit ute, follow the guidelines of the international
Accounting Standards, International Auditing and International Federation of Accountants, and to
execute the code of conduct of Auditors. Membership  of the institute is classified as Chartered
Accountants and Registered Auditors. But a foreign auditor or accountant is not eligible to get the
membership of the institute. The council may cancel the registration of membership or a license
issued to a person if it is found to have been made by mistake. The council is also empowered to takehelp from foreign Chartered Accounts Associations or foreign experts or foreign universities or
associations for conducting auditors examination. The council may recognize foreign auditors' licence
or foreign-chartered institutes or foreign auditor’s examination with the prior approval of HMG. No
one is allowed to engage in the auditor’s prof ession without obtaining an auditor’s license. The
Institute has to publish the complete name-list of its members and of the Auditors each year. Forobtaining a license, a fee as prescribed shall have to be paid. All the members and auditors shall haveWT/ACC/NPL/2
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to abide by the code of conduct provided in the act. Whoever works as an auditor without obtaining a
license commits an offence will be imposed upon a fine not exceeding Rs. 2,000/- or an imprisonment
for a term not exceeding 3 months. The council may also invite participation of an expert foreign
auditor in the council meeting as an observer. The act does not make any specific mention about
foreign auditors working in Nepal.
The Council of the Institute conducts the examination for those entering into the profession,
issues the respective license, provides membership of the institute, and follows the guidelines of the
International Accounting Standards and of the Inte rnational Auditing and International Federation of
Accountants. Membership of the Institute is classified as Chartered Accountants and Registered
Auditors. A foreigner is not eligible for membersh ip of the institute. The council may recognize
foreign auditors’ licenses or foreign chartered inst itutes, or foreign auditors’ examination with the
prior approval of HMG. No one is allowed to engage in the profession without obtaining a license.
The institute publishes the list of all its members and of the auditors each year. For obtaining alicense, a fee as prescribed should be paid.
Foreigners can not work as accountants in Nepal, and the act does not make any specific
mention of the work of foreign auditors in Nepal. However, the Company Act, 2021 (1964, as
amended in 1997) provides that in case a company appoints any foreign national as an auditor, it shall
also appoint as co-auditor a Nepalese citizen possessing the required qualifications.
(c) Engineering services
As provided by the FITT Act 1992 (as amended in 1997), no permission is granted for the
establishment of a foreign company, or for fore ign investment, in the engineering consultancy
services. However, there is no restriction on the establishment of engineering related manufacturing
industries.
(d) Veterinary services
The majority of the veterinary services are provided by the public sector through veterinary
hospitals, veterinary laboratories and services centres at various locations under the Department of
Livestock Services. However, a growing number of private veterinary clinics are being involved in
this activity, especially in the urban areas. Private firms, hatcheries, and individuals (midleveltechnicians, animal health workers) are also involv ed in this business. Mandate for veterinary research
lies with the National Agricultural Research Council, an autonomous body, under the Ministry of
Agriculture.
None of the existing laws, regulations, rules, and measures affects the trade of veterinary
medicines, vaccines, chemicals, and other ingredients related to veterinary services. Private sector orgovernment agencies can freely import, export, and market veterinary drugs and their ingredients.
There is no domestic subsidy, tax incentive or promotion scheme affecting trade in veterinary
medicines. Importers and dealers can easily import and distribute the commodities through various
distribution channels. Government agencies also purchase certain quantities of veterinary drugs,
which are used in the process of treating or preventing animal diseases through various veterinary
hospitals and centres. There is no specific veterinary service act/regulation. Individuals and persons
operating as firms and companies conduct veterinary service in the private sector. Mostly theveterinary service technicians who have retired from or left the job of government veterinary hospitals
or those who are still in job before or after official hours provide veterinary service to the customers
by organizing themselves as a legal firm or otherwise.
2. Computer and Related ServicesWT/ACC/NPL/2
Page 43
Computer and related services constitute a fast growing activity within the service sector in Nepal.
With the increasing informatization of enterprises and government, and with the introduction of
computer courses at the school level, this sector is expected to be one of the leading services in Nepal
in the near future. Currently, some private firms are stepping up efforts to export software. There is no
up-to-date, specific legislation and regulations regarding the computer and related services in Nepal.
3. Real Estate ServicesAs provided by the Foreign Investment and Technology Transfer Act, 1992, no permission
can be granted for the establishment of a foreign company, or for foreign investment,  in the real
estate business.
4. Other Business Services
(a) Management consulting services
As provided by the Foreign Investment and Technology Transfer Act, 1992, no permission
can be granted for the establishment of foreign companies in the management consulting businessunder section 3(4) and the Annex of the Foreign Investment and Technology Transfer Act, 1992.
(b) Placement and supply services of personnel
There are no specific regulations on placement and supply services of personnel in the
domestic market. However, the placement of Nepalese workers in foreign countries is regulated by
Foreign Employment act, 2042 (1985). This act (with its latest amendment in 1992) aims atcontrolling and regulating the business and trade of arranging employment of Nepalese citizens in
foreign countries. No one is allowed to operate this business without obtaining a licence. Such a
licence is issued only to the body corporate established under the existing law after collecting a
licence fee and security deposits in advance from the licensee. A license contains certain terms and
conditions, any default of which or of the existing acts or issues ordered may cause cancellation ofsuch license. However, in certain special situations HMG may cancel a license at any time. Supply of
Nepalese labour can be made only in those countries as notified by HMG, in the official gazette.
Ownership and liability of the business concern can not be transferred or changed without the
permission of HMG. A licensee has to secure prior permission from HMG for the selection of
workmen to be sent for foreign employment, for which it has to apply by furnishing the requiredparticulars. After scanning such permission the licensee has to publish a public advertisement for
selecting the workers. Each selection has to be made impartially and in the presence of government
representative and the representative of the foreign employer, in case it wishes so. But in no case shall
minors and females be provided foreign employment without the consent of their guardians.
A licensee is entitled to obtain a prescribed amount of service charge from the workman for
getting foreign employment. HMG may give permission to the licensee to send workers for foreign
employment only after a formal copy of contract document signed between the licensee and the
employee is produced before HMG. The employee has to be made fully aware of the background
details of the foreign country of employment. A detailed record of the workmen sent abroad has to be
presented by the licensee and HMG may inspect it. Any irregularity found in the process of foreign
employment may be investigated by HMG. The licensee should follow the directives given by HMG
in this regard. A licensee has to renew the licensee every year. The act provides for the formation ofan advisory committee to advise HMG in matters of foreign employment. HMG may formulate rules
as necessary to enforce the act.WT/ACC/NPL/2
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5. Communication Services
(a) Postal services
Postal services in Nepal are governed by the Post Office Act, 2019 (1962) and the Post Office
Rules, 2020 (1963). The Department of Post, HMG, Nepal, provides this service.
(b) Courier services
Private service agencies provide the courier services. There are few international companies
operating in Nepal.
(c) Telecommunications services
His Majesty's Government of Nepal form ulated a communication policy in the
year 2049(1992). The policy encourages private sector participation in the development and operation
of telecommunications services. It also recommends introduction modern communication technology
to provide efficient, reliable, and unhindered communication services to the people.
In line with its communication policy, HMG has enforced the Telecommunications Act, 1997
and Telecommunication and Regulation 1997 to involve national and foreign sectors investors in the
development and operations of telecommunications services within the country. The act provides for
the establishment of an autonomous regulatory  body—Nepal Telecommunication Authority (NTA) to
regulate and facilitate healthy competition among the service providers. Besides providing licences to
establish and operate the services, it also approves and regularises the tariffs, prescribes the qualitystandard of the plant and equipment, and suggests the policies, plans, and programmes to be adopted
by the HMG/N.
Initially, the licences are issued for a period of not more than 10 years that can be renewed
before the expiry of the period. The licence will be renewed for a period of not more than 5 years at a
time. The period of license shall be 25 years at the maximum.
The land, building, plant, equipment and other structures related to telecommunication
services developed with more than 50 per cent of investment by a foreign person or corporate body
shall be under the ownership of HMG/N after the expiry of the period of licence. The licensee may
purchase the assets to operate upon the payment of a price fixed by the Government. However, in case
the equity participation in telecommunications services operated with the investment of a foreignperson or corporate body is up to 50 per cent, the licensee may operate the service by obtaining new a
licensee.
The licensee shall invest 15 per cent of his/her total investment on the development,
extension, and operation of telecommunications services in the rural areas. The Nepal
Telecommunication Corporation (NTA) shall create a fund for the development of ruralcommunications and the licensee shall deposit every year an amount specified by the NTA out of its
annual income.
The licensee shall be allowed to interconnect with another licensee's telecom system on the
terms and conditions mutually agreed between the licensees. Licensees may get exemptions from
income tax for a specified period and also may get exemptions on the customs duty, sales tax, and
other charges to be levied on the import of equipment if HMG/N deems it necessary to encourage
investment by publishing notification  in the Nepal Gazette.WT/ACC/NPL/2
Page 45
All the telecommunication services are to be operated by the licensee and the existing
monopoly operator Nepal Telecommunication Corporation (NTC) have to obtain the licence within
one year.
All the telecommunication services sector will be opened for licence. The NTA will, before
issuing any licence, determine the type of services and number of licences to be issued by a public
notification. Recently, the NTC has awarded a contract for mobile telephone services to a foreigncompany after evaluating several tenders submitted by different suppliers.
(d) Audiovisual services
(i) Motion picture production, distribution and exhibition
The motion picture industry in Nepal is regulated by the Motion Pictures Rules, 2046 (1989),
and the Motion Picture Production, Distribution and Exhibition Act, 2046 (1989). The only limitation
is that according to the FITT Act, 1992 foreign investment can not be approved for motion picture
business to produce movies in the national language s. According to the provisions of the Motion
Pictures Production, Distribution and Exhibition Act, 2046 (1989), a license is required for producing,
distributing, and exhibiting motion pictures in Ne pal. The Ministry of Communications grants the
licences. The Motion Pictures Rules, 2046 (1989) provides for all the procedural aspects of licensing,
fees as well as the terms and conditions to be met by the licensee. The fees are different for nationals
and foreigners. The exhibition of a movie in Nepal requires the permission of the Censor Board.
(ii) Radio and television services
His Majesty’s of Government of Nepal (HMG/N) has promulgated a new National
Communications Policy (NCP) with a view to accomplish the objectives which govern the freedom of
expression and right to information of the people and to encourage the people's active participation
from the private sector in the development of communication.
In pursuance of the new communications policy, (HMG/N) has also enforced the National
Broadcasting Act, 2049 (1992) and National Broadcasting Regulation 2052 (1995).
According to the NCP and the existing laws and regulations corporate bodies from the private
sector shall also be permitted to set Frequency Modulation (FM) broadcasting system in any defined
area which is one of the milestones in the process of liberalization  in the broadcasting sector. Inaccordance with the laws and regulations, HMG/N has issued two licences. One is for Radio Nepal,
which is a national broadcasting organization, another is for the Sagarmatha FM station, which is
private.
Besides this, HMG/N has also enacted the Radio Act 2014(1958) and Radio Communication
(Licensee) Regulation 2049 (1992) to provide li cence to those who need to use, keep, and
manufacture radio equipment within the territory of Nepal.
Television broadcasting services are provided by Nepal Television. At present seventeen
private companies are operating cable TV services.
As provided by the National Broadcasting Act, 2049 (1992), a licensee is required to engage
in broadcasting services. Any person, either a national or a foreigner as an individual or companies
under joint venture arrangements, may seek a licence from HMG to install a satellite or cable
television or any other broadcasting service. Permissi on to broadcast is granted if all requirements are
fulfilled and the prescribed fee has been paid. The act provides for regulation of the installation ofWT/ACC/NPL/2
Page 46
satellite broadcasting earth stations, and other matters relating to broadcasting. The act also outlines
the functions, duties, and powers of the broadcaster.
No person including a foreigner is allowed to keep, manufacture or use a radio instrument
without obtaining a licence. HMG is fully empowered by  this act either to exempt any person or entity
from the provisions of this act by framing rules to that effect. Procedures of obtaining a radio licence,
the fees payable for the license, and its renewal are provided in detail in the Radio (Licence) Rules,1970. A person who has been refused a licence may appeal to HMG against the order of refusal issued
by the concerned authority within 35 days of such order. The decision made by the HMG on this issue
is to be final. An offender keeping or manufactu ring or using a radio equipment without obtaining a
license may be fined up to Rs. 800/- and this amount may be doubled each time in case the offence is
repeated. Repetition of the offence may also lead to confiscation of such radio equipment.
Committing an offence repeatedly other than the above shall lead to a fine of Rs. 800/- at the
maximum for each repetition. Before confiscating a radio equipment a search warrant is also issued tothe offender's place. A person not satisfied with the order or decision made by the HMG may appeal
to the local Appellate Court. HMG is also empowered to frame other rules for the implementation of
this policy.
6. Construction and Related Engineering Services
There is a large number of registered construction enterprises in Nepal. However, most of
them (around 90 per cent) are very small undertakings. An outstanding feature of the construction
activity in Nepal is that the majority of the large-scale projects in this field are foreign-aided or
foreign-financed projects, which are developed by foreign firms. Nepalese contracting firms are thus
only marginally involved. The Nepalese construction firms are mostly involved in residential and
non-residential small and medium-size construction activities.
7. Distribution Services
Distribution services in Nepal can be divided into two broad categories: trade in local
agricultural and manufactured products; and trade in imported consumer and other goods, involving
the network of distributive channels by which products reach the final consumer. Wholesale channels
are particularly in evidence in the distribution of some agricultural products, imported raw materials,and other goods. Only a small proportion of trade in consumer goods goes through wholesale dealers .
There are no specific provisions regarding the involvement of foreigners in wholesale trade . The trade
of imported goods is largely handled by fixed establishments which deliver to retailers or act as
retailers. Nepal's retail trade is not characterized by the presence of large establishments or multiple
stores. Most of the retail trade is in the hands of  the small independent retail stores, and independent
mobile vendors.
Distribution services are governed by the general laws of the country, such as the Company
Act, 2021 (1964, as amended, 1997), the Industrial Enterprises Act, 1992 as amended, and the FITT
Act, 1992. According to the FITT Act, 1992 no permission is granted for the establishment of foreign
companies or for foreign investment in retail trade.
8. Financial Services
(a) InsuranceThe insurance business in Nepal was, until recently, dominated by the Nepal Insurance
Company, a government undertaking. With de-regulation, joint-venture insurance companies have
entered the insurance market. There are nine insu rance companies active today in Nepal, offering
different public enterprises of insurance coverage. Licensed insurance agents and adjusting agenciesWT/ACC/NPL/2
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are also operating in the insurance market. The insurance business is regulated by the Insurance Act,
2049 (1992), and by the Insurance Rules, 2026 (1969).
The Insurance Act provides for the formation of an autonomous Insurance Board for
regulating and controlling the insurance business in Nepal. The Board is the governing body for the
execution of the Insurance Act. A license is requ ired to operate insurance business. National and
foreign companies have to apply to the Board to be registered as insurance companies. They must
furnish related particulars and pay fee. The Board examines the application, and after permission has
been obtained from His Majesty's Government, issues the license to the insurer on a renewal basis
each year. The paid capital to establish an insurance company can not be less than US$0.47 million.
Registration can be cancelled, inter alia,  on the basis that a Nepalese insurer is not provided national
treatment in the country of origin of an insurer in corporated outside Nepal; or if the insurer fails to
establish an office inside Nepal. An insurer is required to appoint an agent in his Nepal-based head
office. The act also regulates the licensing of insurance agents and surveyors, which apply both to thenationals and foreigners. According to the Insurance Rules, 2026 (1969), insurers are required to
separate their life insurance and other insurance into two separate businesses. There is no limitation
on the total number of licenses in the insurance sector. No notification is required concerning the level
of premiums and rendering requirements of insurance services. However, there is a mandatory
provision for the third party in motor vehicle liabilities. But cross-border supply is not permitted in theinsurance services.
It provides for the formation of an autonomous Insurance Board for arranging, regulating,
providing, and controlling insurance business in Nepal. Besides the representation of ministries, two
insurance experts and one insured person are also included in the Board. The Board is the governing
body for the execution of this act. No one is allowed to operate insurance business in Nepal withoutobtaining a licence. National or foreign insurance concerns willing to operate insurance business in
Nepal shall have to apply to the Board for regist ering as an insurer by furnishing the required
particulars accompanied by a required amount of fee. The Board, after examining the application
thoroughly and obtaining permission from HMG, issues a licence to the insurer on a renewal basis
each year. But no insurance concerned whether a national or a foreign one can be registered as aninsurer if registration is sought of a name resembling the name of an already registered insurer, and
does not show a paid capital not less than 30 million rupees. Registration of an insurer can be
cancelled by duly notifying him/her on the following grounds: in case the insurance business is not
started within six months of obtaining a license; if the owner's liabilities exceed his/her assets; in case
of default by insurer making good his/her liabilities beyond three months of a final court decree in acase of insurance policy issued inside Nepal; in case the Nepalese insurer is not provided national
treatment in the country of head office of an insurer incorporated outside Nepal; if an insurer fails to
establish an office inside Nepal; in case of omission or commission of acts made by an insurer.
Cancellation of his/her registration is complete only after proper representation is made and the notice
of such cancellation is issued in two leading newspapers of Nepal. But no cancellation is
retrospective. An insurer after the cancellation of its registration shall have to refund that amount of
fund to the insured persons in the manner and time fixed by the Board. An insurer is required to repairthe losses made to an insured person. Liquidation proceedings can be ordered by HMG upon the
dissolution of an insurance company caused by the cancellation of registration. An insurer is required
to maintain his/her books of account and funds. An insurer should allocate a reserve fund for
accounting any liabilities to be incurred in the course of running insurance business inside Nepal. An
insurer is required to submit annual statement of his insurance business income earned inside Nepalalong with copies of the auditor's report to the Board.  An insurer is required to appoint an agent in his
Nepal-based head office. The act also regulates the licensing of insurance agents and surveyors, which
apply both to nationals or foreigners in somewhat the same manner applicable to insurers. Insurance
Rules (First Amendment), 1996 require insurers to operate their life insurance and insurance business
in the name of two separate business firms. A fine of US$48 to US$160 is fixed for any violation ofthe legal regulations made by an insurer, or insurance agent or a surveyor or any other person, and forWT/ACC/NPL/2
Page 48
the reoccurrence of such offence US$8 shall be charged for each such person. The fine is US$160 in
case of undue handling of business. Punishment for falsifying or not maintaining or not submitting the
books of accounts or documents is up to US$477 or  two years' imprisonment or both. An appeal
against the decision of the Board shall lie on the local Appellate Court within 35 days of such
decision. The Board may charge for any service rendered by it to the insurers or agents at the rate of 1
per cent of their annual income. HMG may also constitute an advisory board for determininginsurance policy rates.
b. Banking and other financial services
This act empowers the finance companies to undertake merchant banking activities with the
prior permission of the Central Bank, which may include payment and money transmission services.
There is no clear definition of finance companies. However, the promulgation of a clear-cut
definition of finance company is underway.
The Nepalese financial sector has expanded greatly since liberalization in the early 1990's.
Before that there were two commercial banks, and some governmental financial institutions. Today
the banking system in Nepal consists of the Central Bank, the Agricultural Development Bank, two
commercial banks with state participation, one of  them fully owned - the Rastriya Banijya Bank
(RBB) - and the Nepal Bank Limited with 41 per cent government ownership, 9 private joint-venture
commercial banks, around 45 finance companies, and around 130 institutes working in the field offinancial transactions, including, among others, cooperative societies.
Banking and other financial services are regulated by the Central Bank, as provided by the
Central Bank Act, 2012 (1955), the Commercial Bank Act, 2034 (1974) as amended, and the Finance
Companies Act, 2042 (1985). To establish a commercial bank an application must be filled up and
submitted to the central bank. The application includes among other  things, the feasibility study,credibility of the promoters, and all the documents related to establish bank under the company Act,
2053 and also the documents as specified by the Central Bank. A bank has to be established as a
limited liability company under the Company Act. Nationals and foreigners can equally apply for the
establishment of a commercial bank. Any foreign commercial bank that desires to open a
representative branch office or liaison office in Nepal may register it under the Company Act with theapproval of the NRB. The NRB shall obtain the consent of HMG prior to granting the approval. The
shares of a commercial bank can not be sold or transferred to any foreign national without approval of
the Central Bank.
Approval for establishing a commercial bank is granted if all the conditions set in the Act
(refer to Commercial Bank Act - sixth Amendment - 2049 (1992) are met, and on the basis of aneconomic needs test.
For the establishment of a financial company, an application should be submitted to the
Central Bank for recommendation. After the recommendation is made, the company can be registered
under the Company Act, 2053 (1997) . A registered company is required to obtain a license from the
Central Bank prior to performing the financial transactions. Recommendation for the establishment of
a financial company is made on the basis of an economic needs test.
Both nationals and foreigners can apply for establishing a financial company in Nepal.
However, no share shall be transferred without approval of the Central Bank.
The Securities Exchange Act (second amendment) passed in the Parliament and made
effective in January 1997 provides for a clear separation of capital market regulatory authority and
functions between the Securities Board and th e Nepal Stock Exchange. Under FITTA, foreignWT/ACC/NPL/2
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portfolio investment is allowed on the Nepal Stock Exchange, subject to an investment limit of 25 per
cent of a company's paid up capital.  Under the New Securities Investment Trust Act 1996, a
provision has been made to allow foreign funds/ assets management company to operate domestic
security market. Foreign security firms are permitted to hold up to 40 per cent of the equity in joint-
venture brokerage firms.
Regarding the foreign investment in finance company and bank, both of them can be
established only on the basis of joint equity ownership (equity framework).
9. Health-related and Social Services
(a) Hospital services
There were a number of institutions involved in  the delivery of government health service in
Nepal during the fiscal year 2053/54 (1996/97) which included approximately 82 hospitals, 80
primary health centres, 775 health posts, and 3197 sub health posts. There are 872 doctors (working in
the Government sector), 4606 nurses, 249 homeopathic doctors, and 5092 health assistants in thecountry.
Under the Ministry of Health, the government  has established through the Department of
Health Services a Central Hospital at the central level, regional hospital in the regions, zonal hospitals
in the zones, district hospitals in the districts. Primary health centres in the 205 electoral
constituencies, health posts in the ilakas (area), and sub-health posts in the VDCs, have beenestablished and arrangements have been made for making available the services of Female
Community Health Volunteers.
By the end of the Eighth Five Year Plan there was, at least, one hospital in each district with
15 to 25 beds where outdoor services, indoor services, family planning and maternity and child health
services, immunisation services and emergency services will be provided. One zonal hospital with 50to 150 beds will be established in each zone of the kingdom for specialized services relating to
paediatrics, gynaecology, general surgery, general medicine, and eye care.
One regional hospital with 50 to 250 beds in each region will provide specialized services,
e.g., dermatology, orthopaedic and psychiatry in addition to those available in zonal hospitals. The
central hospitals with 110 to 3000 beds each will be equipped with sophisticated diagnostic to otherfacilities and provide specialised and super-specialised services in different health fields.  The
government has also extended specialist services to remote mountain regions as and when required
through mobile teams.
Laboratory, diagnostic, and referral system, have been provisioned to strengthen the hospitals
at all levels.
Hospital expansion has been done on the basis of population density and patient load. For this
purpose, the private sector has also been encouraged to open hospitals, nursing homes and polyclinics
in line with the HMG's open and liberal policy after the necessary permission is obtained and subject
to the minimum standards prescribed.
Until now, about 84 government hospitals, two teaching hospitals ten private hospitals, 25
private nursing homes and few private polyclinics have already been established in the country. By
the end of 1991, there was one hospital for 168,000 persons,  and one doctor for 92,000 persons in therural areas.  Likewise, one hospital bed was available for nearly 4,000 persons. Foreigners are allowed
to establish hospitals; they can also start their practice after obtaining the approval of Nepal MedicalWT/ACC/NPL/2
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Council. As far as the incentive for the opening of hospitals inside the kingdom is concerned, the
government provides tariff concession on imports of those equipment  used for medical purposes.
Nepal Medical Council Act provides for the establishment of a Medical Practitioners Council
for the purpose of adequately regulating the health  services in the country and registering the names
of medical practitioners according to their qualifications. No foreign citizen is eligible to get
nominated or elected to the membership or can be a member of the Council. But a foreign medicalspecialist can be invited to attend the meeting of the Council as an observer. The act allows no person
to engage in medical practice without being registered after one year of the commencement of this act.
The act is silent as to the registration of a foreign medical practitioner in Nepal. However, the act is
yet to come into effect.
(b) Other human health services
Integrated Health Services have been provided through constituency level primary health
centres, ilaka level health post, and VDC level sub-health posts.  Accordingly, under the FamilyPlanning and Maternity Child Health Services the family planning, immunization and other health
services have been provided at the grass-root levels to cover all the couples, pregnant mothers, and
children under five. On the malaria eradication front, the malaria-infected area inhabited by a
population of 720,000 have been spread with insecticides and upon collection of blood samples,
persons found infected by malaria have been given the necessary treatment. In the area of tuberculosiscontrol: sputum tests and treatment of TB cases can be organised. On the leprosy side, lepers have
been provided  with multi-drug therapy. To reduc e infection control of diarrhoea, acute respiratory
programme and nutrition programme have also been implemented.
Under the Goiter and Cretinism Eradication Project, there is provision for iodized salt, the
sale and distribution for Iodine injection and installation of iodization plants.
In the field of environmental health training of health workers in food preservation
technology, help in the construction of toilets in health posts/centres and in building sewerage
drainage in and around the infection and disease-prone area has been provisioned.
Control of infectious diseases and AIDS has also got special attention in the country, and for
that matter projects have been initiated.
To provide cheap and locally available medicine, the traditional medical practice has also
been encouraged by the State. More than 174 Ayurvedic hospitals have been established in the
country through the Department of Ayurvedic Health  Service under the Ministry of Health and one
homeopathic and Unani hospital in the country is also in operation.
Several acupuncture clinics and a traditional Tibetan and naturopathy have also been
provisioned and licensed to provide alternative treatment to the people of the country.
(c) Social services
Social welfare is an important sector that can contribute substantially to the acceleration of
the overall development programs of the country.  Government and non-government agencies are
active in providing social services. There are many social service programs in health sectors.
Especially after 1990, spontaneous upsurge of NGOs has been evident in delivering wide range of
health services in the area of ocular therapy, family planning, cholera control, natural disaster reliefwork, ayurvedic and yoga treatment, natural therapy and nutrition programmes. A total of 1,550,000
patients were expected to benefit from the eye hospitals; 481,427 from permanent sterilization and
745,397 through temporary methods in family planning; and 140,000 cases in TB. The social serviceWT/ACC/NPL/2
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programs also aimed at implementing projects on physical disability, natural disasters, and blood
transfusions. Sanitation and drinking water, cont rol of AIDS, and drug abuse programmes are also
being implemented. Food aid is targeted to at least 8,950,000 persons.
To coordinate, mobilize, and promote the non- governmental organiza tions (NGOs) in Nepal,
the Social Welfare Council (SWC) was established as far back as in 1977 constituted under the Social
Service Act, 1992.  Until now 81 INGOs and 146 NGOs in  the health sector have been registered and
are working under the Social Welfare Council.
There are many associations, national and international clubs, and the Red Cross society in
the country actively involved in the delivery of health services. The Government has adopted an open
and liberal policy to encourage and enhance the operation of public and private social sector
organisations in the delivery of  health service in the country.
The Social Welfare Act, 1991 was enacted with a view to bring social welfare activities into
close harmony with nation building and development process for the overall development of Nepaland Nepalese society, and therefrom to enable the weaker and helpless persons or sections of the
society to live a truly human life, to raise the prestige and dignity of persons and institutions engaged
in social service, and to bring coordination among the activities of the various NGOs.  Under the
framework of this act, the HMG, through the Ministry of Youth, Sports and Culture, Social Welfare
Council and NGOs, may launch social welfare and social service programmes directed at the welfareof children, aged, the helpless, and the disabled persons and backward communities, protection of the
rights and welfare of women in order to enable them to actively participate in the development
process as well as to enable the persons engaged in juvenile delinquency, drug or other addictions and
social evils to lead a dignified and respectful life to help the unemployed, poor and uneducated
persons to live a respectful life, and help in the proper management of religious trusts and shrines.
10. Tourism and Travel-Related Services
Tourism  is one of the most important services  in Nepal. Contribution of tourism to GDP of
the nation was 3.8 per cent and it also provided 18 per cent of the total foreign exchange during
FY 1995/96. Tourism is regulated by a whole set of gene ral rules, laws, and industrial acts such as the
Tourism Act, 2035 (1978) amended in 2053 (1997), by the Hotel, Lodges, Restaurants, Bar andTourist Guide Rules, 2038 (1981), the Travel and Trekking Agency Rules, 2037 (1980), the Trekking
and Rafting Rules, 2044 (1985), and by the Mountaineering Rules, 2036 (1979).
As provided by the Foreign Investment and Technology Transfer Act, 1992, no permission is
granted for the establishment of foreign companies,  or foreign investment in the Travel Agencies,
Trekking Agencies, Water Rafting, Pony Trekking, Horse Riding, and Tourist Lodging. Foreign direct
investment, however, is permitted in the hotel industry, for which HMG's permission is required as
provided by FITTA, 1992.
Any person who desires to establish a travel or trekking agency must obtain a licence from
HMG and pay the prescribed fee. The Department of Tourism registers a hotel, lodge or bar of tourist
standard after a thorough scrutiny after payment of the required fee. The Tourist Act further provides
the procedures of registration, renewal, operation, suspension, and cancellation of other tourism-
related businesses such as rafting, gliding, ballooning, jungle safari, camping, trekking, bird watching,skiing, and other activities as specified. To work as  a tourist guide, it is necessary to be a Nepalese
national and obtain a licence. Foreign investment in the hotel sector is open. There is no ceiling on
foreign equity participation. But FITTA has reserved 23 items for investment for the Nepalese
investors. Foreign investment proposals up to the extent of five hundred million rupees in fixed
capital is approved by the Department of Industry. In case of industry with fixed assets in excess oflimit is cleared by  the  Industrial Promotion Board. When there is an application of foreignWT/ACC/NPL/2
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investment the Department of Industry will inform the applicant of the decision of the board within
30 days from the date of application. Foreign investment will be permitted  up to 100 per cent  in
industries.  Pursuant to FITTA, industries classified in Annex 6 shall not be permitted for foreign
investment. However technology transfer is allowed in all public enterprises of industries even in the
areas, where foreign investment is not permitted. A one window committee is formed to provide
facilities and concessions to the industries.WT/ACC/NPL/2
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11. Transport Services
(a) Air transport services
HMG recognizes the importance of air transport services for the development of the tourist
sector. Therefore, it follows an liberal policy in pr omoting the involvement of the private sector, both
national and foreign, to engage in the air transport business. Currently, the Royal Nepal Airlines and
14 private Nepalese companies provide domestic and international air transport services. Nepal hassigned a number of bilateral agreements by which the major international carriers provide
international air transport services to and from Nepal.
12. Other Services
As provided by the Foreign Investment and Technology Transfer Act, 1992, all personal
service businesses such as beauty parlour, tailoring, driving, training, etc., are reserved for the
Nepalese nationals.
2. P
OLICIES AFFECTING TRADE IN SERVICES
(a) The Ministries of Industry, Telecommunicati on, Transport, Commerce, Tourism, and Finance
are the authentic bodies in the conduct of service activities in Nepal. Besides, there are a number of
professional associations in Nepal rendering specialized services. They include, for example, Nepal
Medical Association, Chartered Accountants A ssociation, Management Association of Nepal,
Association of Travel Agencies, Hotel Association, and Trekking Agencies.
(b) A number of laws in Nepal provide for the settlement of disputes through judicial organs,
which range from the district level to the Supreme Court. Cases depending on the public enterprises of
services are settled by the respective sectoral agencies under their prevailing laws and regulation.
(c) There are different provisions and requirements to be fulfilled for the supply of services.
Under government undertakings, service suppliers have  to comply with the conditions laid down by
the respective ministries. Private sector agencies have to be registered with the concerned ministries
for the supply of services. There is virtually no specific condition applicable to the private sector
suppliers.
Under the current economic programme, the go vernment is reducing monopoly powers of the
public agencies in the utility sector, including electricity and telecommunications. Monopolistic rightsare not granted to any private enterprise. The Government is determined to involve the private sector
in developing infrastructure projects in area such as road transport and electricity on the "Build-
Operate-Transfer (BOT)" principle.
The Government has adopted a policy to expand trolley bus services in the feasible routes
within the country. In the transport sector there is, moreover, a policy to encourage private sectorparticipation.
The Ministry of Works and Transport is responsible for the businesses related, inter alia, to
policy on development of inland and waterways transport and management of transportation .
(d) There are no safeguard provisions for trade in services.
(e) The dividends on investment, royalty, technical and managerial services are subject to a 15
per cent tax. Foreigners are free to repatriate their income abroad earned either from investment, orWT/ACC/NPL/2
Page 54
technology transfer contracts, or personal income. There are no restrictions of any form on current
account payments.
(f) There are no limitations on capital transactions as provided by the FITTA, 1992.
The Government has reduced subsidies for infrastructure services like electricity, water,
health, etc. Tax incentives and facilities are provided by the Government under the Industrial
Enterprises Act, 1992.
3. M ARKET ACCESS AND NATIONAL TREATMENT
(a) Limitations on the number of service suppliers
There is no limitation on the number of service suppliers. However, the authorization to
establish commercial banks and financial companies is based on an economic needs test.
(b) Limitations on the total value of service transaction or assets
There is no limitation currently in effect in Nepal.
(c) Limitations on the total number of service op erations or on the total quantity of service 
output
There is virtually no limitation on the number of service operations and on the total quantity
of service output except on certain essential services such as the telecommunications, especially the
wired line services.
(d) Limitations on the total number of natu ral persons that may be employed in a 
particular service sector
According to the Industrial Enterprises Act,  1992, the manpower required for any industry,
including all services, shall have to be recruited from among Nepali citizens. However, foreigners are
permitted to work in Nepal on technical ground, in particular with regard to technology transfer. A
work permit issued by HMG is required for foreigners to work in Nepal. A foreigner, however, cannot be employed for more than 10 years.
(e) Restrictions on or requirement of specific public enterprises of legal entity through 
which a service may be supplied
Commercial banks and financial companies have to be incorporated as limited liability
company, under the Companies Act, 2021 (1964, as amended, 1997).
(f) Limitations on the participation of foreign capital
Some service activities as described above are reserved for the  Nepali nationals and
companies. Foreign portfolio investment is allowed on the Nepal Stock Exchange subject to an
investment limit of 25 per cent of a company’s paid-up capital. Foreign security firms are permitted to
hold 40 per cent of the equity in joint-venture brokerage firms.
(g) Measures providing for less than the treatmen t accorded to national services or service 
suppliersWT/ACC/NPL/2
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All foreign investment in services must obtain a prior permission of HMG. Domestic
investors do not require such permission. Both the foreign and national companies have to register
with the concerned ministry. Foreign tourists have al so to pay certain fees not applicable to the Nepali
nationals.
4. M OST  FAVOURED NATION TREATMENT
Basically, there are no measures in effect in Nepal inconsistent with MFN treatment in the
field of services.
VII. INSTITUTIONAL BASE FOR TRADE AND ECONOMIC RELATIONS WITH 
THIRD COUNTRIES
1. B ILATERAL OR PLURILATERAL AGREEMENTS RELATING TO FOREIGN TRADE IN GOODS AND 
TRADE IN SERVICES
As mentioned in section II 3(f), Nepal has signed bilateral trade agreements with 17 countries.
These agreements are on most-favoured-nation treatment basis. They basically relate to trade ingoods. Details are presented in Annex 8A (WT/ACC/NPL/1/Add.1).
Nepal as a landlocked country is interested in maintaining good neighbourliness on a
developed contractual basis for transit and trade relations with India. That is why, Nepal has always
tried to develop harmonious relations with India. Nepal considers the treaties of transit and trade as
well as the agreement of cooperation to control unauthorised trade signed in 1991 (as amended)provide a good basis for the development and diversification of trade. The two countries have signed
these treaties with the aim of promoting trade, facilitating transit and controlling unauthorised trade.
They accord each other unconditional most-favoured -nation treatment. They also exempt imports of
primary products from duties or any form of quantitative restrictions on a reciprocal basis in the
context of their border trade. These products are the typical and traditional raw materials producedusually for the traditional neighbouring market destinations in each others' border area.
The treaty of trade also provides that India grants specially favourable (preferential) treatment
to industrial products manufactured in Nepal on the basis of non-reciprocity in order to promote the
industrial development of Nepal.
2. E
CONOMIC INTEGRATION , CUSTOMS UNION AND FREE -TRADE AREA AGREEMENTS
As mentioned in section II.3(f), Nepal is a member South Asian Preferential Trade
Arrangements (SAPTA). The SAPTA agreements are preferential ones. The Ninth SAARC Summit,
which took place in 1997 has decided to move from SAPTA to SAFTA (South Asian Free Trade
Area) by the year 2001. Details are pres ented in Annex 8B (WT/ACC/NPL/1/Add.1).
3. L ABOUR MARKETS INTEGRATION AGREEMENTS
None
4. M ULTILATERAL ECONOMIC COOPERATION , MEMBERSHIP IN THE MULTILATERAL ECONOMIC 
ORGANIZATIONS , TRADE -RELATED PROGRAMMES OF OTHER MULTILATERAL ORGANIZATIONS
Nepal has been actively participating in many multilateral economic cooperation
programmes, especially within the UN System. Many specialised agencies on economic cooperation
have their presence in Nepal. The UNDP coordinates the activities of these agencies. The governmentWT/ACC/NPL/2
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holds the view that these multilateral cooperation arrangements can not be fully exploited without
joining the WTO.WT/ACC/NPL/2
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LIST OF ANNEXES
Annex 1 Statistics and Publications
Annex 2 List of Laws and Legal Acts
Annex 3 Information on Import Licensing Procedures
Annex 3.1 Products Banned or Restricted for ExportsAnnex 3.2 Products Banned or Restricted for Imports
Annex 4 Information on Implementation and Administration of the Customs Valuation
Agreement
Annex 5 Information on Technical Barriers to Trade
Annex 6 Information on State Trading
Annex 7 Services Sectoral Classification List
Annex 8A Bilateral Foreign Trade Agreements Entered into by NepalAnnex 8B Trade Agreements or Parts of Them which Contain Preferential Trade
Provisions
__________