RESTRICTED  
  
WT/TPR/G/381  
8 October 2018  
(18-6187) Page: 1/25 
Trade Policy Review Body   Original: English  
 
TRADE POLICY REVIEW  
REPORT BY  
NEPAL 
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the 
Marrakesh Agreement Establishing the World Trade Organization), the policy statement by Nepal  is 
attached.  
 
 
Note: This report is subject to restri cted circulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Nepal . 
  WT/TPR/G/381 • Nepal  
 
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  ACRONYM  
AfT : Aid for Trade  
ADS : Agriculture Development Strategy  
ASYCUDA  : Automated System for Customs Data  
BAFIA  : Bank and Financial Institution Act  
BFI : Bank and Financial Institution  
BIPPA  : Bilateral Investment Promotion and Protection Agreement  
BIMSTEC  : Bay of Bengal Initiative for Multi -Sectoral Technical and Economic Cooperation  
BPO : Business Process Outsourcing  
BRI : Belt and Road Initiative  
CBTL : Cross Border Transmission Line  
DFQF  : Duty -Free and Quota -Free 
DPs : Development Partners  
DFTQC  : Department of Food Technology and Quality Control  
DTAA  : Double Tax Avoidance Agreement  
DTIS : Diagnostic Trade Integration Study  
e-GP : Electronic Government Procurement  
FDI : Foreign Direct Investment  
FITTA  : Foreign Investment and Technology Transfer Act  
FY : Fiscal Year  
GDP : Gross Domestic Product  
GoN : Government of Nepal  
GSP : Generalized System of Preferences  
IBN : Investment Board Nepal  
ICD : Inland Container Depo  
ICP : Integrated Check Post  
ICT : Information and Communication Technology  
IEC : International Electrotechnical Commission  
IP : Intellectual Property  
ISO : International Organization for Standardization  
kWh : Kilowatt Hour  
LDCs : Least Developed Countries  
LLDCs  : Landlocked Least Developed Countries  
MAPs  : Medicinal and Aromatic Plants  
MHPs  : Micro -Hydropower Plants  
MW : Megawatt  
MoICS  : Ministry of Industry, Commerce and Supplies  
MoF : Ministry of Finance  
MoU : Memorandum of Understanding  
MRA : Mutual Recognition Agreement  
MTS : Multilateral Trading System  
MVA : Motor Vehicle Agreement  
NBSM  : Nepal Bureau of Standards and Metrology  
NRs : Nepalese Rupees  WT/TPR/G/381 • Nepal  
 
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  NTIS : Nepal Trade Integrated Strategy  
NRB : Nepal Rastra Bank  
PIA : Project Investment Agreement  
PPP : Public Private Partnership  
PTA : Power Trade Agreement  
RKC : Revised Kyoto Convention  
SAARC  : South Asian Association for Regional Cooperation  
SAFTA  : South Asian Free Trade Area  
SAPTA  : SAARC Preferential Trading Arrangement  
SATIS  : SAARC Agreement on Trade in Services  
SDG : Sustainable Development Goals  
SEZ : Special Economic Zone  
SPS : Sanitary and Phytosanitary  
TEPC : Trade and Economic Promotion Centre  
TFA : Trade Facilitation Agreement  
TPR : Trade Policy Review  
TSMP  : Transmission System Master Plan  
UNCITRAL  : United Nations Commission on International Trade Law  
UNCTAD  : United Nations Conference on Trade  and Development  
USD : United States Dollars  
VAT : Value Added Tax  
WTO : World Trade Organization  
 WT/TPR/G/381 • Nepal  
 
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  Contents  
1   INTRODUCTION  ................................ ................................ ................................ ..........  6 
2   RECENT ECONOMIC DEVELOPMENT  ................................ ................................ .............  6 
2.1   Main Developments During the Review Period  ................................ ................................ . 6 
2.2   Investment and Incentives for Investors  ................................ ................................ ........  8 
2.3   Monetary Policy Management  ................................ ................................ ........................  8 
2.4   Remittance  ................................ ................................ ................................ .................  9 
2.5   Tax Sy stem - Corporate  ................................ ................................ ...............................  9 
2.6   Private Sector Development and Privatization  ................................ ................................ . 9 
2.7   Competition Policy  ................................ ................................ ................................ ......10 
2.8   Public Procurement  ................................ ................................ ................................ .....10 
3   TRADE IN GOODS  ................................ ................................ ................................ ...... 10 
3.1   Industry – Manufacturing  ................................ ................................ ............................ 10 
3.2   Energy  ................................ ................................ ................................ ...................... 11 
3.3   Mines and Mineral Resources  ................................ ................................ ....................... 12 
3.4   Agriculture  ................................ ................................ ................................ ................. 12 
3.5   Sanitary and Phytosanitary (SPS)  ................................ ................................ ................. 12 
3.6   Technical Regulations and Standards  ................................ ................................ ............ 13 
4   TRADE IN SERVICE S ................................ ................................ ................................ .. 13 
4.1   Tourism  ................................ ................................ ................................ ..................... 13 
4.2   Transpor t ................................ ................................ ................................ .................. 14 
4.3   Information and Communication Technology (ICT)  ................................ ......................... 14 
4.4   Financial Services, Banking and Insurance  ................................ ................................ .....15 
5   POLICY FOR AN EF FECTIVE TRADE REGIME  ................................ ..............................  16 
5.1   Trade Policy  ................................ ................................ ................................ ............... 16 
5.2   Nepal Trade Integration Strategy (NTIS), 2016  ................................ .............................. 16 
5.3   Industrial Policy ................................ ................................ ................................ .......... 17 
5.4   Intellectual Property Rights  ................................ ................................ .......................... 17 
5.5   Foreign Investment Policy  ................................ ................................ ............................ 18 
5.6   Other Major Policies Related to Trade and Investment  ................................ ..................... 18 
6   REFORMS AND IMPR OVEMENTS  ................................ ................................ ................  18 
6.1   Legal and Policy Reforms  ................................ ................................ ............................. 18 
6.2   Structural Reforms  ................................ ................................ ................................ .....19 
6.3   Customs Reforms  ................................ ................................ ................................ .......19 
6.4   Reforms Related to Trade Infrastructure  ................................ ................................ ........ 19 
7   TRADING ARRANGEM ENTS  ................................ ................................ ........................  20 
7.1   Bilateral - Trade with India, China and Bangladesh  ................................ ......................... 20 
7.2   Regional - SAFTA and BIMSTEC  ................................ ................................ .................... 20 
7.3   Multilateral Trading Arrangements  ................................ ................................ ................ 21 
8   CONSTRAINTS  ................................ ................................ ................................ ...........  21 WT/TPR/G/381 • Nepal  
 
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  9   OPPORTUN ITIES AND WAY FORWAR D ................................ ................................ ...... 22 
9.1   Political Stability  ................................ ................................ ................................ ......... 22 
9.2   Macroeconomic Stability and Restructuring  ................................ ................................ ....22 
9.3   Conducive Trade and Investment Environment  ................................ ............................... 23 
9.4   Energy and Infrastructure Development  ................................ ................................ ........ 23 
9.5   Improved Economic Diplomacy  ................................ ................................ ..................... 23 
9.6   Governance Reform  ................................ ................................ ................................ ....23 
9.7   Trade Facilitation and Infrastructure  ................................ ................................ ............. 24 
9.8   Aid for Trade  ................................ ................................ ................................ .............. 24 
9.9   E-Commerce  ................................ ................................ ................................ .............. 24 
10   CONCLUSION ................................ ................................ ................................ ...........  25 
 
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  1  INTRODUCTION  
1.1.  Nepal 's Second Trade Policy Review (TPR) at the World Trade Organization (WTO) covers the 
period between 2012 and 2018. Nepal joined the WTO on 23 April 2004 as the first 
least-developed country (LDC) through the full working party negotiation. Since 2012, Nepal has 
undergone significant transformation, which includes changes in the political system following the 
promulgation of the Constitution of Nepal in 2015. The review is being carried out at a time when 
Nepal has entered a new era of stability concluding its long political transition after a decade -long 
conflict. In this process, Nepal has set an exemplary model of conflict resolution through a unique 
home -grown and inclusive peace process.  
1.2.  The current Constitution of Nepal was promulgated on 20 September 2015 through the 
Constituent Assembly. The Constitution laid a new foundation for Nepal 's socio -economic 
transformation. It embraces the principles of democracy,  federalism, secularism, and 
inclusiveness. It has provisions of three levels of government: federal, provincial and local. 
Accordingly, there are seven provinces and 753 local levels. Governments have been formed at all 
three tiers after the successful co mpletion of elections in 2017.  
1.3.  The Government of Nepal (GoN), which enjoys two -thirds majority in the Parliament, has a 
long-term goal of "Prosperous Nepal, Happy Nepali ". To achieve this goal, the Government has set 
objectives of achieving high economic growth, balancing and strengthening the economy, and 
making it more inclusive and just, in the interest of all Nepali. The overall focus is on policies that 
promote innovation by developing a national economy to encourage trade, investment, production, 
and creation of employment.  
1.4.  The Constitution promotes the role of the private sector in the economy and envisages that 
Nepal shall pursue policies to maintain competition and fairness in the market. In particular, the 
Constitution encourages foreign capital a nd technological investment as well as development and 
expansion of industries in areas of comparative advantage. This economic ecology is backed by the 
Constitution which provides a comprehensive list of thirty -one fundamental rights, including 
economic, social and cultural rights. The Constitution, therefore, is instrumental in fixing the 
politics and bringing the focus on economic development agenda through the realization of Nepal 's 
long-awaited goals and aspirations.  
2  RECENT ECONOMIC DEVE LOPMENT  
2.1  Main Developments During the Review Period  
2.1.  Nepal is steadily moving in the path of economic transformation. Nepal's annual growth was 
4.3% on average in the last decade, during which the agricultural and non -agricultural sectors 
grew at yearly average rates of 2 .9% and 4.9%, respectively. During the review period, Nepal 
grew at an average GDP growth rate of 4.4%. The high economic growth rate of 7.4% in 2016/17 
is expected to sustain at 5.9% in 2017/18. This positive growth trend has resulted in the size of 
the e conomy reaching NRs 3 trillion from just over NRs 1.5 trillion at the end of the last review 
period.  
2.2.  The Nepali economy suffered adversely from the devastating earthquakes in 2015 and its 
aftershocks as well as subsequent serious disruption of supplies (i ncluding fuel and other 
essentials) at the southern border. Nevertheless, Nepal 's economic growth has rebounded and 
moved in positive directions due to political stability, availability of energy, improvements in 
supplies, expansion of the trade sector, ac celeration of construction work, and high growth in 
industrial output and services sector. While the nominal per -capita GDP was only US$702 at the 
end of the last review period, it is expected to cross the thousand mark and reach US $1,004 in FY 
2017/18. Bo lstered by the political stability and positive outlook ahead, Nepal is aiming for near 
double -digit growth in the upcoming fiscal year (FY) and attaining double digit growth in the next 
five years. The gross capital formation to GDP ratio was 38.0% at the  end of the last review 
period. It reached 45.7% in 2016/17 and is expected to increase further to 51.8% in 2017/18. The 
amount of Foreign Direct Investment (FDI) in Nepal is growing at a significant rate as it increased 
three -folds from 17 billion NRs. in  2016/17 to 61 billion NRs. in 2017/18. The following table 
summarizes some major macroeconomic indicators of Nepal.  WT/TPR/G/381 • Nepal  
 
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  Table 2.1 Some major macroeconomic indicators of Nepal  
Fiscal year  2011/12  2012/13  2013/14  2014/15  2015/16  2016/17  2017/18a 
In NRs billion at 2000/01 prices  
GDP in basic 
prices  614.6  637.8  674.2  694.3  695.7  747.1  791.1  
Agriculture  224.7  227.2  237.5  240.1  240.7  253.2  260.3  
Industry  98.1 100.7  107.8  109.4  102.4  115.1  125.3  
Services  318.5  336.8  357.7  374.3  383.1  411.6  438.9  
GDP growth rate  4.6 3.8 5.7 3.0 0.2 7.4 5.9 
Share of different sectors in real GDP (at current prices)  
Primary  35.8 34.4 33.2 32.4 32.2 29.4 28.2 
Secondary  14.4 14.6 14.3 14.2 13.6 14.1 14.2 
Tertiary  49.8 51.0 52.5 53.4 54.2 56.5 57.6 
In nominal prices  
Total trade  
(in NRs billion)  536.0  633.6  806.4  860.0  843.7  1063.1  1324.5  
Export f.o.b  74.3 76.9 92.0 85.3 70.1 73.0 81.2 
Import c.i.f.  461.7  556.7  714.4  774.7  773.6  990.1  1243.3  
Total e xpenditure 
(in NRs billion)  339.2  358.6  435.0  531.5  601.0  837.2  1082.9  
Recurrent  243.5  247.5  303.5  339.4  371.3  518.6  738.9  
Capital  51.4 54.6 66.7 88.8 123.3  208.7  234.6  
Financing  44.3 56.5 64.8 103.3  106.4  109.9  109.4  
Total i ncome  
(in NRs billion)  288.0 333.9  396.9  450.4  531.4  647.5  770.3  
Revenue  244.4  296.0  356.6  405.9  482.0  609.2  730.1  
Foreign g rants 40.8 35.2 34.0 36.4 32.5 31.9 15.3*  
Foreign l oan 11.1 12.0 18.0 25.6 33.2 59.0 35.1*  
Total population 
(in million)  26.9 27.2 27.6 28.0 28.3 28.7 29.1 
Per c apita GDP 
(US$) 702 708 725 766 748 866 1004 
Exchange rate 
(NRs per US$1 ) 81.02  87.96  98.21  99.49  106.35  106.21  102.96  
a Yearly preliminary estimate*  first eight months . 
Source :  GoN, Ministry of Finance (MoF ), Economic Survey 2017/18, Central Bureau of Statistics, National 
Accounts, Nepal Rastra Bank (NRB), Quarterly Economic Bulletin.  
2.3.  The relatively smooth implementation of fiscal federalism has also been a key highlight of this 
review period. With the trans formation from a unitary government structure to a federal one, 
Nepal 's first federal budget was launched for FY 2018/19. In its federal budget, Nepal has 
prioritised creation of employment opportunities, promotion of domestic and foreign investment in 
sectors such as energy, infrastructure, tourism, agriculture, and improvement of public service 
delivery. Moreover, according to the constitutional provision, the seven provincial and 753 local 
governments also presented their budgetary outlays, prioritising sectors and activities. The 
complete list of federal, provincial and local level powers and concurrent powers are mentioned in 
annexes 5 to 9 of the Constitution.  
2.4.  Though trade is a key component of the economy, trade deficit has posed challenge to 
Nepal 's development. After Nepal 's accession to the WTO, share of export in total trade has 
decreased from 28.3% in FY 2004/05 to 6.9% in FY 2016/17. The share of import has increased 
from 71.7% in FY 2004/05 to 93.1% in FY 2016/17. As a consequence, export -impor t ratio has 
deteriorated from 1:2.5 in FY 2004/05 to 1:13.5 in FY 2016/17.Nepal 's trade deficit has grown by 
more than ten -folds. The volume of trade has nearly trebled compared to the end of last review 
period. However, in the last five years, imports hav e grown at a yearly average rate of 17% while 
exports have only grown at 0.5% on average.  
Table 2.2 Nepal 's trade scenario 2004/05 – 2016/17  
Fiscal Year  Exports  
(NRs billion)  Imports  
(NRs billion)  Trade deficit 
(NRs billion)  Export -import 
ratio  
2004/05  58.4 148.3  -89.9 1:2.5  
2005/06  59.8 160.7  -100.9  1:2.7  
2006/07  58.9 195.8  -136.9  1:3.3  
2007/08  58.5 237.0  -178.6  1:4.1  WT/TPR/G/381 • Nepal  
 
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  Fiscal Year  Exports  
(NRs billion)  Imports  
(NRs billion)  Trade deficit 
(NRs billion)  Export -import 
ratio  
2008/09  68.6 291.0  -222.4  1:4.2  
2009/10  60.9 375.6  -314.7  1:6.2  
2010/11  64.6 397.5  -333.0  1:6.2  
2011/12  74.1 498.2  -424.1  1:6.7  
2012/13  77.4 601.2  -523.9  1:7.8  
2013/14  91.4 722.8  -631.4  1:7.9  
2014/15  86.6 784.6  -697.9  1:9.1  
2015/16  71.1 781.1  -710.0  1:11 
2016/17  73.1 986.0  -912.8  1:13.5  
Source :  GoN, Trade and Export Promotion Centre, A Glimpse of Nepal 's Foreign Trade  
 (Statistical Presentation) 2017 . 
2.2  Investment and Incentives for Investors  
2.5.  The Constitution promotes the role of private sector and encourages foreign capital and 
technological investment as an inherent feature. Several policies and acts have been developed in 
line with the Constitution to protect rights of the investors, includi ng through Intellectual Property 
Policy, 2017, Foreign Investment Policy, 2015, and Industrial Enterprises Act, 2016, among others. 
Foreign Investment and Technology Transfer Act (FITTA), 1992 governs FDI. Foreign investors are 
allowed to invest up to 100%  in almost all industries, except for few on the negative list. The 
Company Act, 2017 has made provisions for establishing, managing and administering companies 
in more simplified, convenient and transparent manner. The Industrial Enterprises Act, 2016 
covers entry, operation and exit procedures for business and also outlines customs and tax 
payment requirement for investors. The Labour Act, 2017 has implemented no work no pay 
principle.  
2.6.  Nepal has signed Bilateral Investment Promotion and Protection Agreeme nt (BIPPA) with six 
countries and Double Tax Avoidance Agreement (DTAA) with ten countries. As an LDC, Nepal has 
duty free market access in many developed and developing countries. However, these market 
access opportunities are yet to be fully realized. He nce, there is a dearth of FDI to boost 
production and productivity by utilizing market access advantages.  
2.7.  Several incentives are available to investors and there are further concessions for investment 
in certain priority sectors. Foreign investors are all owed to repatriate 100% of their profits after 
meeting legal requirements. Companies are allowed to hire foreign nationals. Tourist/non -tourist 
and business visas can be issued with recommendation from concerned government agencies and 
in case of investmen t of US$100,000 or more, residential visa is granted directly to the investor. 
In terms of property rights, investors are allowed to buy or lease land in the name of their 
company.  
2.8.  Nepal 's recent success in attracting foreign investment evidences improved  investment 
climate in the country. Nepal has improved its Doing Business ranking and has the third most 
favourable business climate and fourth most competitive economy in South Asia. Nepal organized 
Investment Summit in 2017 to promote FDI as well as tech nology and skill transfer. The event was 
attended by more than 250 institutional and individual investors from 21 countries who pledged 
investment totalling US$13.51 billion.  
2.9.  The Government is committed to attract foreign investment by treating foreign in vestment as 
complementary to national capital formation. It is making further legal, institutional and 
procedural reforms to reduce cost of doing business and ensure an investment -friendly 
environment. It is planning to make the whole process from business  registration to closure 
predictable, simplified, transparent and based on information technology. It is also making 
provisions to deliver all services from one point in a time -bound manner. The Government is 
strengthening the Investment Board Nepal (IBN) as an institution for granting investment approval 
through one -door system, including for public private partnerships (PPPs).  
2.3  Monetary Policy Management  
2.10.   Nepal Rastra Bank (NRB ), the central bank of Nepal, has primary duties of maintaining 
macroeconomic and financial sector stability. While average consumer price inflation was 4.5% in WT/TPR/G/381 • Nepal  
 
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  FY 2016/17, it has remained at 4.1% in the first eleven months of FY 2017/18. Inflation has 
remained within a reasonable range. Broad money supply (M2) increased by 15.5% in FY 2016/17 
compared to 12.2% in FY 2010/11. Average growth of money supply remained at around 18.08% 
during the last five years. Foreign Exchange reserve stood at NRs 1094 billi on as of mid -June 2018 
compared to NRs 272.3 billion at the end of last review period. Similarly, while at the end of last 
review period, level of foreign exchange reserve was sufficient to cover 7.3 months of merchandise 
and service imports, the figure wa s 11.4 months for FY 2016/17.  
2.11.   Moreover, Monetary Policy, 2018/19 has made significant investment -friendly reforms by 
simplifying the process of repatriation of foreign investment earnings, introducing exchange rate 
hedging facility for foreign investors, p rovisioning for loan facilities for foreign investors, and 
making it possible for commercial banks to provide additional services such as escrow fund 
management for foreign investors.  
2.4  Remittance  
2.12.   Remittance has been one of the drivers of Nepali economy and has played a significant role 
in lifting many Nepali above the poverty line. At present, around 4.3 million people are abroad to 
work, especially in Gulf countries, Malaysia, and South Korea. The ratio of remittance sent by 
Nepali working abroad to GDP rem ained around 26% during the review period and the figure has 
been relatively stable in recent years. Growth rate in the number of Nepali workers going for 
foreign employment has declined recently. Regardless, remittance sent by Nepali working abroad 
is a m ajor source of foreign currency and has helped in maintaining a favourable balance of 
payment.   
2.13.   The Government 's emphasis is on making foreign employment more secured and systematic 
while creating more decent and gainful jobs at home. In the short -run, its  focus is on protecting 
migrants ' rights, establishing formal and secure channels to send remittance and new avenues to 
invest it. In the long run, the focus is on developing industries and expanding opportunities in 
Nepal so that Nepali do not have to mig rate abroad for employment.  
2.5  Tax System - Corporate  
2.14.   Nepal has one of the lowest corporate tax regimes in South Asia making it an attractive 
investment destination. Tax rates for various entities according to their nature i s summarised in 
the table below.  
Table 2.3 Tax rates for various entities  
Nature of Entity  Tax Rate  
Normal rate for entities  25% 
Special industries registered under section 3 of Industrial Enterprise Act, 1992  20% 
Banks and Financial Institutions  30% 
General insurance 30%, life insurance 25%  25% - 30% 
Enterprises involved in petroleum businesses  30% 
Saving and credit cooperatives located in urban areas  20% 
Enterprises operating roads, bridges, railways hydropower stations, transmission lines, etc. on 
BOOT basis, etc.  20% 
Source:  Government of Nepal.  
2.6  Private Sector Development and Privatization  
2.15.   Nepal 's Fourteenth Periodic Plan recognizes private sector as the key driver of economic 
growth and aims to expand its activities and enhance its competitive capacity. It also intends to 
increase private sector investment for creating jobs and increasing economi c growth. The 
Government has adopted strategies of promoting investment -friendly business environment, 
flexible labour laws, and collaborative investment in infrastructure, among others. Following the 
adoption of Privatization Act, 1994, PEs have been grad ually privatized. However, PEs are not 
simply commercial enterprises as they hold other welfare objectives as well, including provision of 
basic goods and services for citizens. Moreover, as some privatized PEs have not performed 
satisfactorily, the Govern ment is reviewing its privatisation policy.  WT/TPR/G/381 • Nepal  
 
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  2.16.   Private sector occupies a major share of the economy. Following the adoption of liberal 
economic policies in the 1990s, private sector investment in services, including education and 
health took off. Private sec tor's involvement in the ICT sector, including broadcasting has also 
been exemplary. Moreover, Nepal has adopted Open Sky Policy resulting in large private sector 
involvement in the operation of airlines ensuring market competition. Furthermore, Nepal has set 
an example of hydropower development through the involvement of private sector, including PPP. 
Hence, private sector has significantly contributed to Nepal's economic growth.  
2.7  Competition Policy  
2.17.   The Constitution provisions economic policy that provides for regulation to maintain 
fairness, accountability, and competition in all economic activities. It emphasizes protection of 
consumer interests by maintaining trade fairness and discipline by making the national economy 
competitive, while ending activities  such as restricting competition, monopoly, and artificial 
scarcity. The Competition Promotion and Market Protection Act, 2007 and its corresponding 2010 
regulation provide the legal framework for competitive market environment.  
2.18.   The Act aims to make the na tional economy more open, liberal, market -oriented and 
competitive. Its objectives are to maintain fair competition, protect markets against undesirable 
interference, and encourage competitive pricing, and control monopoly and restrictive trade 
practices. The Act has a provision of a Competition Promotion and Market Protection Board 
constituted under the Chairmanship of Secretary of Ministry of Industry, Commerce and Supplies 
(MoICS) to enhance fair competition in the market. Moreover, to further promote fa ir business 
practices, the Government is drafting Anti -Dumping Countervailing and Safeguard Bill.  
2.8  Public Procurement  
2.19.   Nepal has made significant reforms in public procurement. The most important reform was 
the development of electronic government procureme nt (e -GP) system. At present, more than 
thousand public entities are active on this system. The system has helped to overcome challenges 
of inefficiencies arising from manual and paper -based procurement. This has resulted in increased 
access of people, tra nsparency, and gains in efficiencies in public procurement. The Public 
Procurement Act, 2007 (with latest amendments in 2016) and the accompanying Public 
Procurement Regulations, 2007 provide the legal framework for public procurement in Nepal.  
3  TRADE IN GOODS  
3.1  Industry – Manufacturing   
3.1.  Nepal 's industrial policy aims to enhance export of industrial goods by producing quality and 
competitive products, increase industrial sector 's contribution by effectively utilizing local 
resources, raw materials, and skill s, and make Nepal an attractive destination for investment. 
Although the contribution of industrial production as a percentage of GDP has declined in the last 
two decades, growth rate in industrial production has picked up in recent years, reaching 9.7% in  
FY 2016/17 and expected to be at around 8.0% in FY 2017/18.  
3.2.  Moving forward, Nepal plans to promote FDI in manufacturing industries with export potential 
and high value -addition in Nepal. Similarly, the Government has taken initiatives to further 
simplify  industrial registration and provide tax incentives to manufacturing industries that start 
production within a stipulated time. The Government plans to increase industrial production by 
promoting investment in agriculture, forestry and mines -based sectors and other comparatively 
advantageous sectors with a policy to encourage establishment of big companies that can compete 
in the global market.  
3.3.  To further boost industrial production, ensure a competitive and investment -friendly 
environment, and simplify ad ministrative procedures, the Government has created industrial 
estates and Special Economic Zones (SEZs). It is carrying out efforts related to infrastructure 
development to establish at least one industrial zone, and special economic zone in each province  
in coordination with provinces and in partnership with private sectors. There are 10 industrial 
estates at present and the Government intends to add further nine estates. Similarly, while one 
SEZ is already operational, feasibility studies are being carri ed out to establish further eight SEZs. WT/TPR/G/381 • Nepal  
 
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  Product -specific zones for footwear, carpet, leather goods, handicrafts, and readymade garments 
are also being planned. The Government has plans to set up industrial villages in all local levels. 
Importantly, it is a lso planning to establish cross -border economic zones.  
3.2  Energy  
3.4.  Nepal aims to sustainably utilize its rich energy potential by building on its success in solving 
the energy crisis during the review period. In the recent past, Nepal had experienced power 
shortage which slowed development activities. However, at present, the end to load shedding has 
been officially declared. The Government is focusing its efforts on developing and expanding 
hydroelectricity and all types of renewable energy to provide clean ene rgy to all households within 
the next three years and avail smooth electricity supply across Nepal within the next five years. 
Accordingly, the Government has set forward a target to increase per capita electricity 
consumption up to 1 ,500 kilowatt hour (kW h) within the next 10 years by transforming 
consumption and distribution pattern so as to minimize the need for fossil fuels. To achieve these 
ambitions, it plans to produce 3000 megawatt (MW), 5000 MW and 15000 MW hydroelectricity 
within the next 3, 5 and  10 years, respectively, out of the economically feasible 43,130 MW, 
through public and private investment in small, medium and large hydroelectricity projects.  
3.5.  Nepal 's private sector plays a vital role in hydropower development as it makes up nearly half 
of the total installed capacity of 1073 MW. Moreover, while 2200 MW of hydropower projects are 
under construction, 1300 MW of hydropower projects have undergone power purchase agreement 
which are awaiting financial closure. More than three thousand micro -hydropower plant (MHPs) 
have been installed so far in remote areas. The MHPs are owned and managed by communities 
and ensure a reliable alternative source of energy by providing off -grid access to a significant 
population.  
3.6.  The Government is integrating the electricity of completed projects into national grid system 
through the development of transmission lines. The Transmission System Master Plan (TSMP) 
unveiled in July 2018 aims to develop 6,867 kilometr es of transmission line across Nepal. The 
Government p lans to develop transmission lines, spreading along East -West and Mid -Hill Highway 
and along major river corridors spreading North -South.  It is envisaged that these projects will be 
built through various models of private sector involvement. To open up ele ctricity connectivity with 
northern neighbo ur, Nepal plans to develop Cross Border Transmission Lines (CTBLs) such as 
Galchhi -Rasuawagadi -Kerung transmission line connecting Nepal to China. To that end, 
cooperation agreement between Nepal Electricity Autho rity and State Grid Corporation of China 
has been concluded. Similarly, while one high voltage CTBL connecting Dhalkebar (Nepal) and 
Muzzaffarpur (India) is in operation, several other CBTL are being planned at different locations 
along the southern border  of Nepal. Among the planned CBTL, the 400 kV Butwal  (Nepal) – 
Gorakhpur (India) CBTL has been prioritized and is being pursued for construction. Government 's 
focus on developing transmission lines is aimed at meeting Nepal 's requirement in the short run 
and exporting power to neighboring countries in the long run.  
3.7.  Significant steps have been taken for increased energy co -operation with neighbo uring 
countries. In November 2014, the South Asian Association for Regional Co -operation (SAARC) 
Framework Agreemen t on Energy Cooperation (Electricity), entered into force which paved way for 
relevant institutions in respective countries to develop transmission interconnectivity within the 
region to allow cross -border power supply. In the same year, Nepal and India si gned a Power 
Trade Agreement (PTA) making way for free trade of power. In 2018, Nepal and China signed a 
Memorandum of Understanding (MoU) for establishing a mechanism on energy cooperation, 
furthering commitment of enhancing cooperation and creating an av enue for collaboration in the 
sector. Moreover, on 10 August 2018, Nepal and Bangladesh signed an MoU for cooperation in the 
energy sector paving way for Nepal to export surplus electricity to Bangladesh.  
3.8.  Ministry of Energy, Water Resources and Irrigation launched a white paper in May 2018 with 
an aim to attain self -sufficiency in electricity through overall development of electricity sector, 
reduce trade deficit through the replacement of other sources of energy by electricity, expand 
internal and external  market for electricity, and deliver sustainable, reliable and clean energy to 
people. The white paper has stated Government 's plan to amend Electricity Act and Nepal 
Electricity Authority Act and formulate the Renewable Energy Development Act. Immediate s et up 
of Electricity Regulation Commission under the Electricity Regulation Commission Act, 2017 is WT/TPR/G/381 • Nepal  
 
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  planned. The white paper also incorporates 'One Province, One Mega Project ' strategy with an aim 
to build a mega hydro or solar project in each of the seven  provinces.  
3.3  Mines and Mineral Resources  
3.9.  Nepal 's Mineral Policy seeks to sustainably utilize its immense potential in mineral resources 
and contribute to making the economy more competitive, dynamic and prosperous. Government 
aims to collaborate with the p rivate sector in exploring, excavating and processing potential 
minerals and precious metals. Nepal lies in the centre of the 2,500 km Himalayan belt, which has 
favourable geography for various mines and minerals and hence offers a plethora of unparalleled  
opportunities for investors in the mining and mineral sectors. With 83% of the region being 
mountainous and hilly territory, Nepal is abundant in iron, limestone, talc, red clay, granite, 
marble, gold, precious and semi -precious stones (tourmaline, aquama rine, ruby and sapphire) a nd 
other co nstruction minerals.  
3.10.   Notable developments have taken place in the sector. The cement industry has considerably 
expanded to a point where it has been able to fulfil a significant proportion of the domestic 
consumption an d is expected to start exporting in a few years. Recently, significant FDI related to 
the cement industry has been approved and invested in Nepal. The IBN signed a Project 
Investment Agreement (PIA) worth US$359.2 million with Hongshi -Shivam  Cement, a Nepa l-China 
joint venture company, to set up a mega cement factory in Nepal. The company has already 
started trial production. Similarly, during Prime Minister KP Sharma Oli 's visit to China, IBN also 
signed PIA with Huaxin  Cement Narayani  to establish a US$140 million cement plant. Moreover, 
the Government has identified exploration for many fuel minerals, including petroleum, natural 
gas, and methane gas. Various developments and reforms initiatives taken by the Government 
shows its commitment to promote hi gher trade and investment in the mines and minerals sector.  
3.4  Agriculture  
3.11.   During the review period, the Agriculture Development Strategy (ADS) was brought with a 
vision for a self -reliant, sustainable, competitive, and inclusive agricultural sector that dri ves 
economic growth and contributes to improved livelihoods and food and nutrition security. Nepal 's 
geography, topography, water resources and ample supply of labour give a comparative 
advantage in agricultural production. Nepal 's economy is mostly depend ent on agriculture, but the 
sector 's contribution to GDP has been decreasing and is estimated to be at around 27.6% for 
2017/18. Nevertheless, the sector absorbs about two -thirds of employment. The Government has 
put forward plans to double agricultural pr oduction in the next 5 years and shift a large population 
employed in the sector to non -agricultural sectors through modernization, diversification, 
commercialization, and restructuring of this sector.  
3.12.   The Government also has plans to work with private sec tor to establish organic fertilizer, 
chemical fertilizer, pesticides and agriculture equipment factories to facilitate supply of agricultural 
inputs as well as industries based on herbal and forest materials. Building on Trade Policy, 2015, 
National Trade Integration Strategy, 2016 has identified agricultural products such as large 
cardamom, ginger, tea, and medicinal and aromatic plants (MAPs) together with other products 
and services as having high export potential. Development of these products along wit h other 
potential products such as coffee, fruits and vegetable juice, honey, and so on has been 
prioritized.  
3.5  Sanitary and Phytosanitary (SPS)  
3.13.   The National Agriculture Policy, 2004 provisions for development of technical regulations 
and standards to contro l food quality and certify food products. ADS has put forward the 
Government 's plans to adopt and implement internationally compatible food quality and safety 
standards. It also envisions an independent Food Authority following the preparation of a new Foo d 
Act and focuses on capacity strengthening of Department of Food Technology and Quality Control 
(DFTQC), Department of Agriculture, Department of Livestock as well as upgrading of laboratories 
under them to an internationally accredited level. The DFTQC c ontinues to function as the SPS 
Enquiry point. It has responsibilities of collecting SPS related data and acting as a government 
agency through which SPS related rules, regulations, standards, and guidelines are regulated. 
Nepal has  either fulfilled or is regularly fulfilling its SPS related obligations of WTO. However, WT/TPR/G/381 • Nepal  
 
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  Nepali exporters continue to face SPS related hurdles while exporting goods to destined markets. 
The DFTQC has taken initiatives to enhance lab capacity and upgrade the overall quality of 
infrastructure. However, there are areas of improvement, especially in building capacity, 
strengthening quality of infrastructure, and improving accreditation through Mutual Recognition 
Agreement (MRA) among others.  
3.6  Technical Regulations and Standards  
3.14.   To fac ilitate international trade, Nepal has adopted standards that are mostly based on 
international standards, such as International Organization for Standardizati on (ISO), International 
Electro -technical Commission (IEC), the Codex Alimentarius or well -recogn ized national standards 
such as the British Standard Institution, and the Bureau of Indian Standards. Nepal has been 
upgraded to full membership of the ISO, coming into effect from January 2014. The legal 
framework for standards and technical requirements is guided by Nepal Standards (Certification 
Mark) Act, 1980 while Standards Weights and Measures Act, 1969 guide metrology. 904 national 
standards have been developed by Nepal Bureau of Standards and Metrology (NBSM), out of which 
51 standards on product, process, test methods and management systems have been developed 
after 2012. Also, out of the 904 national standards, more than 100 are adopted from ISO. 
Similarly, NBSM established bilateral cooperation agreement with Bureau of Indian Standards in 
2017 an d an MoU with Bangladesh 's Standards & Testing Institution in 2016. Finally, development 
of National Accreditation Board and relevant legal instruments are in progress.  
4  TRADE IN SERVICES  
4.1  Tourism  
4.1.  Nepal offers world class destination due to its outstanding natural beauty, biodiversity, and 
rich cultural heritage. Lumbini, for example was rated by Lonely Planet as one of the top ten 
destinations in Asia to visit in 2018. The Travel and Tourism Competitiveness Report 2017 ranks 
Nepal high in terms of price com petitiveness (19th), international openness/ visa requirements 
(8th) and abundance of natural resources (27th). Nepal offers majestic mountains (8 out 14 
highest peaks), socio -cultural diversity, World Heritage sites, religious sites (including Lumbini, 
Pashupatinath, Janakpur, Muktinath, etc.), natural heritage (including various national parks and 
wildlife sanctuaries) and adventure tourism opportunities, among others. The National Tourism 
Strategy, 2016 -2025, launched in November 2016, seeks to tap into this potential by mobilizing 
domestic investment, promoting FDI in the sector, and implementing strategies such as branding, 
marketing, infrastructure development and improvement of quality of tourism. Some primary 
targets include increasing arrivals to 2. 5 million per year after 5 years, average length of stay to 
15 days, average spending per tourist per day to 90 USD, jobs in the tourism sector to 898,000, 
foreign exchange earnings from the sector to NRs 340 billion, and the sector 's contribution to 
Nepal 's GDP to 9.3%, by 2025. Similarly, Tourism Vision 2020 recognizes tourism as a sector with 
the most promise to contribute to Nepal 's sustainable growth. It envisions tourism being Nepal 's 
primary sector generating employment. It aims to achieve the target  of welcoming 2 million 
tourists a year by 2020.  
4.2.  Tourism has continued to remain one of the most significant contributors to the national 
economy in terms of income, employment, foreign exchange and extending market for domestic 
production of both commodit ies and services. Nepal has seen consistent growth in number of 
tourists in the last 2 years with impressive growth rates of about 40% and 25% in 2016 and 2017, 
respectively. More than 1700 foreign investment projects have been started in the tourism secto r 
with worth about NRs 137.7 billion in total and have created almost 65,000 direct jobs during the 
review period. The following table summarizes some of Nepal 's data on tourists and tourism.  
Table 4.1 data on  tourists and tourism  
Year Total 
tourists  Total 
tourists 
by air  Total 
tourists 
by land  Average 
length of 
stay  
(in days)  Per day 
expenditure 
(US$) Receipts 
from 
tourists 
(US$ 
million)  Number 
of 
hotels  Number 
of beds  
2012  803,092   598,258  204,834  12.1 35.6 379 853 31,657 
2013  797,616  594,848  202,768  12.5 42 388.9  1,026 34,523 
2014  790,118  585,981  204,137  12.4 48 472.2  1,075 36,179 WT/TPR/G/381 • Nepal  
 
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  Year Total 
tourists  Total 
tourists 
by air  Total 
tourists 
by land  Average 
length of 
stay  
(in days)  Per day 
expenditure 
(US$) Receipts 
from 
tourists 
(US$ 
million)  Number 
of 
hotels  Number 
of beds  
2015  538,970  407,412  131,588  13.2 70 544.3  1,073 36,950 
2016  753,002  572,563  180,439  13.4 53 392.7  1,062 38,242 
2017  940,218  760,577  179,641  12.6 54 510 1,101 39,833 
Source:  Ministry of Culture, Tourism and Civil Aviation/MoF . 
Note:  The figures do not include Indian tourists who travel to Nepal by land.  
4.3.  The Government recognises the need to address gaps in tourism -related infrastructure to 
truly unleash the potential of tourism sector in Nepal. Hence, it has prioritized development of 
tourism -related infrastructure, promotion of market and expansion of se rvices and facilities for 
recreational, natural, historical, religious and adventurous tourism. It has highlighted plans to 
further expand the Tribhuvan  International Airport, initiate Nijgadh  International Airport, 
accelerate construction of Pokhara  Regio nal International Airport, and complete and operate 
Gautam Buddha  Regional International Airport. There are also plans to upgrade Biratnagar , 
Janakpur , Nepalgunj and Dhangadi airports as Regional Airport and start flights to neighbouring 
countries. Finally , necessary preparations are underway to organize 'Visit Nepal Year ' in 2020 to 
attract more tourists. These plans represent enormous investment opportunities.  
4.2  Transport  
4.4.  The transport sector has grown substantially and is expected to transform significantl y given 
Government 's priority in expanding transport infrastructure. Transport sector contributes about 
7.97% of GDP and grew at a rate of 5.41% in FY 2017/18. Average growth rate of the sector in 
the past five years has been 6.32%. By FY 2017/18, length o f strategic roads has increased to 
29,639 km which includes 13,149 km black topped roads, 6,956 km gravelled roads, and 
9,534 km earthen roads. Nepal also has 35 domestic airports in operation and an international 
airport in Kathmandu.  
4.5.  Nepal has gained si gnificant achievements in cooperation for improved connectivity. 
Visakhapatnam has also been added as an additional port. Efforts are underway to further diversify 
the transit facility and connectivity through China and Bangladesh. In fact, in May 2017, Ne pal 
signed the framework agreement on Belt and Road Initiative (BRI) with China. The MoU signed 
between Nepal and China seeks to strengthen cooperation in connectivity, including transit 
transport, logistics systems, transport network and related infrastru cture development such as 
railway, road, and civil aviation, among others. Moreover, during high level visit by Prime Minister 
KP Sharma Oli to China, Nepal and China have agreed to intensify enhanced connectivity, such as 
ports, roads, railways, aviation and communications within the  overarching framework of 
trans-Himalayan Multi -Dimensional Connectivity Network. Similarly, in 2015, Nepal, Bangladesh, 
Bhutan, and India signed a Motor Vehicles Agreement (MVA) for the Regulation of Passenger, 
Personnel and C argo Vehicular Traffic.  
4.6.  The Government has put forward plans to develop important national highways as express 
highways and East -West and North -South roads of national importance as national strategic road 
network. There are plans to connect the centres of  all local levels with black -topped roads in the 
next five years. To cater to the needs of growing population, development of mass public 
transportation systems – bus-rapid transit (BRT), monorails, airports, and railways, including 
Mechi -Mahakali Railway,  Kathmandu -Birgunj  Railway, and Rasuwagadhi -Kathmandu -Pokhara -
Lumbini  Railway, has been prioritised. Transport sector is open to domestic as well as foreign 
investment and is key in achieving infrastructure development goals.  
4.3  Information and Communication  Technology (ICT)  
4.7.  Nepal recognises the role of ICT as an enabler and driver of economic growth. Accordingly, 
there is an emphasis to focus the majority of domestic and foreign investment in the ICT sector. 
The Government aims to improve public service deli very by promoting the use of ICT to modernize 
areas, including public administration, professional areas, public and private services, database, 
statistics, financial transactions as well as for biometric information and national identity card. WT/TPR/G/381 • Nepal  
 
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  Moreover, I T services and business process outsourcing (BPO) has been identified in NTIS, 2016 
as one of the three priority service sectors with the most potential for exports. In addition, Nepal 
also recognises growing importance of e -Commerce for overall economic d evelopment. Recently, 
"e-Commerce National Action Plan " has also been proposed which highlights the Government 's 
commitment to developing the sector.  
4.8.  Nepal 's telecom sector has been further liberalized through the adoption of various policies 
and regulations, including National Broadband Policy, 2015, Information and Communication 
Technology (ICT) Policy, 2015, Spectrum Policy, 2016, and Telecom Infrastructure Service 
Regulation, 2017. The ICT Policy, 2015 addresses issues of policy incongruence an d is a positive 
step in unlocking the growth of IT, and IT -enabled service sector. Based on the Broadband Policy, 
Government has already started efforts to expand broadband network throughout the country, 
especially laying optical fibre in the rural areas by utilising Telecommunication Rural Development 
Fund. Following this, it has plans to develop information high -way at all local levels. Besides, other 
legal provisions, including National Broadband Master Plan, Telecommunication Frequency 
Distribution Reg ulation, and Regulatory Framework for Mobile Portability, are being drafted.   
4.9.  Significant improvements have been observed in the ICT sector, particularly in the 
participation of private sector. Private investment has increased in print and electronic media  as 
well as distribution and cable network. Box office system with electronic ticketing for film 
distribution and exhibition has been introduced making collection of revenue such as Value Added 
Tax (VAT) in the film business and film development fee more s ystematic. The Government is also 
building e -Payment Gateway. Moreover, Nepal 's ICT sector performed as one of the fastest 
emerging sectors during the review period and has shown immense potential for growth in 
upcoming years. Access to television and radi o has reached around 80% and 90% of the 
population respectively and is expected to reach 100% within the next few years. Internet 
penetration rate has drastically increased from 35.70% in 2014 to 62.94% in 2017. Mobile 
penetration rate has reached 130% wit h mobile subscriptions increasing from 18.93 million in 
2013 to 38.1 million in 2017.  
4.10.   Despite various positive developments, there are further opportunities for improvement 
through investment in the ICT sector in Nepal. UNCTAD 's e-Trade Readiness Assessme nt of Nepal 
commends Government of Nepal 's efforts in ensuring that young Nepali have good IT acumen and 
the coverage of ICT is good enough. Moreover, the report highlights areas that need more work. 
There are opportunities to invest for improvements in mo bile network coverage, international 
internet bandwidth, and secured internet services. Similarly, opportunities lie in improving logistics 
by bundling existing products and services together and introducing new ones. Further innovation 
supported by a favo urable legal and regulatory framework will facilitate growth of domestic and 
international e -Commerce. These developments can enable more than 100,000 Small and Medium 
Enterprises in Nepal, especially owned by women and young entrepreneurs, to grow globall y. This 
growth is supported by an increasing youth population that is educated and has necessary digital 
skills to utilize the opportunities presented by ICT development.  
4.4  Financial Services, Banking and Insurance  
4.11.   The Bank and Financial Institutions (BFI) sector has been a key driver of growth of Nepal 's 
service sector. The Government aims to use BFI sector to support infrastructure and industrial 
development in Nepal. The BFI sector continued to grow during the review period. There are 28 
commercial banks out of which seven are joint venture banks with foreign companies. The success 
of joint venture banks is evident from their relatively better performance in the Nepali market and 
consistently high and growing profits compared to BFIs in South Asia, collect ively totalling NRs 
13.41 billion in FY 2016/17.There are also 36 development banks, 25 finance companies, and 63 
micro -credit institutions. As of March 2018, the number of insurance companies has reached 39, 
including 18 life insurance, 20 non -life insura nce and one re-insurance company. Out of the 39 
companies, three are branches of foreign insurance companies, three have been established with 
joint investment with foreign insurance companies, 30 are priv ate, while three are 
Government -owned. Foreign inve stors have been able to make use of "Policy Provision for Opening 
Branch Offices by Foreign Bank or Financial Institutions in Nepal 2010 " and continuously increasing 
their presence in Nepal 's financial sector.   
4.12.   Reforms in the financial sector have also bee n carried out. NRB raised the paid -up capital of 
financial institutions, for example, from NRs 2 billion to 8 billion in the case of commercial banks. WT/TPR/G/381 • Nepal  
 
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  This was carried out to strengthen the entire financial sector by promoting financial stability and 
mobil izing resources for long -term development and by expanding their coverage. The NRB Act 
Second Amendment, 2016 aims to strengthen and clarify the bank resolution powers of the central 
bank, increases the NRB 's capital, and aligns accounting standards with i nternational practice. 
Assigned capital required for foreign BFIs to open branches for wholesale banking has been 
reduced from US$30 million to US$20 million. The Deposit and Credit Guarantee Fund Act, 2016 
enhances the legal framework for the deposit insu rance scheme.  
4.13.   The Government has emphasized on achieving double -digit growth which needs increased 
investments in large infrastructure and energy projects. Hence, along with legal reforms, it is 
planning for further supportive policy measures. These includ e introduction of new institutions 
such as Private Equity, Venture Fund and Hedge Fund into the capital market, carrying out of 
credit rating assessment of Nepal, introduction of blended financing instruments, among others. 
Banks and Financial Institutions  Act (BAFIA), 2017 has provisioned for and encouraged the 
establishment of Infrastructure Development Banks that have a minimum paid up capital of 
20  billion rupees and foreign ownership of up to 85%. Policy provision 2017 has been issued to 
provide licen ce for such banks. The Government is accelerating the process of operating a planned 
Infrastructure Development Bank in collaboration with the private sector.  
4.14.   The number of BFI branches has significantly grown and has reached 6418. While each BFI 
branch c overed approximately 9000 people on average in mid -June 2012, the population served 
by per branch of BFIs stood at 4490 in mid -June 2018. Similarly, the number of mobile banking 
and internet banking users has reached 4 million and 784 thousand, respectivel y. These figures 
represent a significant improvement in access to financial services but there are opportunities to 
improve further. The Government has initiated a policy to ensure presence of banks in all local 
levels. In this backdrop, opportunities exis t to expand bank coverage and extend mobile and 
internet banking to the entire section of the population. Finally, further policy changes are required 
to incentivize mobilization of investment in the productive sector.  
5  POLICY FOR AN EFFECT IVE TRADE REGIME  
5.1  Trade Policy  
5.1.  Nepal has updated the trade policy to harmonize with other sectoral policies, create 
alignment between trade policy and NTIS, address increasing trade deficit, and promote exports 
by enhancing the supply -side capacities. Nepal 's first compreh ensive trade policy after joining the 
WTO was Trade Policy, 2009 which replaced Trade Policy, 1992. Trade Policy, 2009 embraced the 
principles of liberal, open and transparent economic system and had primary objectives to increase 
trade sector's contributi on to the national economy and help reduce poverty and accelerate 
economic growth. However, results of the Policy remained mixed and hence have been replaced by 
Trade Policy, 2015.  
5.2.  The vision of Trade Policy, 2015 is to achieve economic prosperity by enhan cing trade 
sector 's contribution to the national economy through export promotion. The strategies focus on 
strengthening supply -side capacity, increasing exports of value -added competitive products and 
services in the world market, increasing access of goo ds, services, and intellectual property to 
regional and world markets, among others. The Trade Policy, 2015 also provisions for a Board of 
Trade under the Chairmanship of Minister of Industry, Commerce and Supplies. The Board includes 
the private sector an d has responsibilities of assisting in formulating policies necessary for trade 
promotion, trade facilitation, policy monitoring and inter -agency coordination.  
5.2  Nepal Trade Integration Strategy (NTIS), 2016  
5.3.  Nepal has introduced its third -generation trade i ntegration strategy to strengthen trade and 
export enabling environment, focus on product development and strengthen supply capacity of 
priority products, strengthen institutional capacity, trade negotiation and inter -agency 
coordination, and build and enh ance trade related infrastructures. Previously, Nepal had launched 
the Diagnostic Trade Integration Study (DTIS) in 2004 that could not be appropriately 
implemented due to various reasons. Later, DTIS was revised as NTIS and released in 2010 to 
complement the Trade Policy, 2009. This was further updated in 2016 in line with the updated 
Trade Policy, 2015.  WT/TPR/G/381 • Nepal  
 
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  5.4.  NTIS 2016 aims to enhance Nepal's export competitiveness by addressing seven cross -
cutting strategic areas: trade capacity, trade and investment environme nt, trade and transport 
facilitation, standards and technical regulations, SPS, intellectual property rights, and trade in 
services. NTIS 2016 focuses on value chain development of priority export products, including four 
agro-based (large cardamom, ginger , tea and MAPs), five craft and manufacturing (all fabrics, 
textile, yarn & ropes, leather, footwear, chyangra pashmina, and knotted carpets), and three 
services (skilled & semi -skilled professionals at various categories, IT & BPO, and tourism). It has 
identified one hundred and ninety actions to be implemented within the time -frame of five years.  
5.3  Industrial Policy  
5.5.  Continuing its efforts to make industrial policy relevant and supportive of industrial 
development, Nepal introduced Industrial Enterprises Act, 2016 to further simplify and clarify 
procedures for entry, operation and exit of industrial enterprises as well as introduce much -needed 
reforms. Nepal 's first industrial policy was released in 1957 and later updated and replaced in 
1960, 1974, 1981, 1987, 1992 and 2010, respectively. Industrial Policy, 2010 guides Nepal's 
overall policy related to the industrial sector. Its objectives are to enhance export of industrial 
goods, improve industrial sector 's contribution to the economy by using local reso urces, make 
industrial enterprises sustainable and dependable through application of innovative and 
environment -friendly technology, make Nepal an attractive destination in South Asia for 
investment, and protect intellectual property rights of industries. Industrial Policy, 2010 is 
supported by the Industrial Enterprises Act, 2016 which replaced Industrial Enterprises Act, 1992. 
Some salient features of the Act are: tax incentives, concession and benefits of VAT and custom 
duties, facilities to acquire land , provisions ensuring no nationalisation of industries, and creation 
of a single window service for foreign investors. The Act has provided various fiscal incentives to 
industries, including, an effective tax rate of 16% for almost all manufacturing indust ries and 25% 
discount on export income from export of goods.  
5.4  Intellectual Property Rights  
5.6.  Nepal has achieved significant success at policy domain of intellectual property (IP) rights 
regime. Nepal's Constitution guarantees intellectual property rights by including IP within the 
fundamental rights chapter. Article 25 of the Constitution ensures rights of all Nepali citizens to 
"acquire, own, sell, dispose, acquire business profits from, and otherwise deal with property, " 
where property means any form of pro perty including movable and immovable property and 
intellectual property. Moreover, Nepal released its first National Intellectual Property Policy in 
2017.  
5.7.  The Policy aims to create a balanced IP system in Nepal and has a vision of a creative nation 
throu gh preservation and provision of intellectual property protection. The Policy 's objectives are 
to: encourage protection, promotion, and development of IP, develop a balanced IP system, create 
awareness about social, economic and cultural aspects of IP, enc ourage commercialization of IP, 
and strengthen legal, administrative and human resources to ensure protection and enforcement 
of IP. The Policy revises existing legal framework, recognizes for an enactment of law related to 
patent, industrial design, trade mark, utility model, geographical indications, traditional and 
indigenous knowledge, folklore, traditional knowledge, integrated circuit, plant variety protection, 
trade secrets and biodiversity. It aims to create awareness and promote intellectual propert y 
rights. It also addresses the need to curb IP infringement and recommends revising penal 
provisions under existing legal framework. The Policy also envisions a National Intellectual 
Property Council consisting of members from ministries concerned, civil society, and experts to 
facilitate and advise on policy issues. Building on the IP Policy, at present, the Intellectual Property 
Rights Bill is in the process of being drafted.  
5.8.  Other relevant reforms have also been carried out. Nepal has carried out reform s related to 
royalty collection from users in the music industry, whereby, music artists receive royalties from 
their music broadcasted on various media channels, including radio, FM, television, telecom, 
transportation, and other channels. This reflects t he Government 's commitment in protecting 
intellectual property rights of innovators and investors. Department of Industry and Nepal 
Copyright Registrar 's Office are two directly relevant public institutions that look into matters 
related to intellectual pr operty.  WT/TPR/G/381 • Nepal  
 
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  5.5  Foreign Investment Policy  
5.9.  Nepal has taken significant strides in reforming its investment regime to support trade. 
Foreign Investment and One Window Policy, 1992 was replaced with Foreign Investment Policy, 
2015. The Policy 's objectives are to: mobilize foreign capital, technology, skill and knowledge in 
priority sectors for broad -based economic growth, employment creation, and utilisation of local 
resources, allowing entry of modern technologies, managerial and technical ski lls along with 
foreign capital for increasing domestic production and productivity, and establish Nepal as an 
attractive investment destination.  
5.10.   The Policy seeks to achieve these objectives through 19 policy instruments and 36 working 
policies. Some signi ficant provisions for foreign investors are: repatriation of dividend, profits and 
salary of employees, national treatment in respect of incentives and facilities, facilities in terms of 
deductible income in income taxes, accelerated depreciation, options to raise financial resources 
within and outside the country, visa facilitation, additional security measures and facilitation in 
land acquisition, among others. Importantly, the Policy has assured national treatment and non -
nationalization of investment, p rovided ground for mediation and arbitration as per UNCITRAL 
rules and simplified exit procedures. Two high -level institutional mechanisms have been formed to 
facilitate foreign investment – Investment Board, chaired by the Prime Minister of Nepal and the 
Industrial Promotion Board, chaired by the Minister of Industry, Commerce and Supplies. As per, 
the aspiration of the Policy, new draft of Foreign Investment and Technology Transfer A ct has been 
prepared.  
5.6  Other Major Policies Related to Trade and Investmen t 
5.11.   A key development has been the operationalization of the IBN. Nepal had enacted 
Investment Board Act, 2011 and Regulations, 2012 with the objectives of mobilizing domestic and 
external private resources, promoting PPP, supporting development of physical infrastructures and 
enhancing the industrialization process. The Act has constituted a high -powered investment board 
under the chairmanship of Prime Minister of Nepal. The Board is empowered to formulate policy on 
investment, select priority areas for inve stment seek proposals from potential investors, decide 
terms and conditions of investment, facilitate investment, provide financial and non -financial 
services and incentives, promote coordination among various government agencies, and provide 
fast-track pr oblem -solving services and market Nepal as investment destination, among others. 
IBN has been mandated for approval, management and facilitation of wide -ranging projects, 
including hydro -electricity projects with more than 500 MW generating capacity, and i nfrastructure 
and services industries worth more than NRs 10 billion. IBN has already been successful in 
facilitating export -oriented projects in hydropower and manufacturing sectors.  
5.12.   Going forward, the Government seeks to encourage foreign investment furt her to make 
Nepal an attractive destination for foreign investment by treating it as a complement of national 
capital formation. Recently, an act has been proposed that seeks to reform and unify laws related 
to foreign investment. The act aims to make the national economy further competitive, liberalized, 
and employment -oriented and promote export and attract foreign investment. As such, the 
proposed act is even more outward -looking. Moreover, recent budget has put forward proposals to 
strengthen the IBN fu rther by developing it as an institution for granting investment approval 
through a one -door system, including for PPPs.  
6  REFORMS AND IMPROVEM ENTS  
6.1  Legal and Policy Reforms  
6.1.  Significant legal reforms have been made to further mainstream trade in national 
development process. A major achievement is promulgation of the Constitution which acts as the 
Mega Policy. Based on the Constitution, Government is making necessary legal provisions to 
implement fundamental rights such as rights related to consumer protection , social security and 
employment. Trade and industrial sector is well reflected in the Constitution. An important reform 
was the enactment of Muluki Ain (Civil Code) Act, 2017 which replaced Civil Code (Muluki Ain), 
1853 (revised in 1962). The Act has impo rtant provisions of reforms that brings paradigm shift in 
social practices.  WT/TPR/G/381 • Nepal  
 
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  6.2.  Other relevant legal reforms include policies and acts such as Trade Policy, 2015. Foreign 
Development Cooperation Policy, 2014; Foreign Investment Policy, 2015; Intellectual Prop erty 
Policy, 2017; Industrial Enterprise Act, 2016; Special Economic Zone Act, 2016; Labor Act, 2017; 
and BAFIA, 2017. Reforms have been made in the areas of procurement with amendments to 
Public Procurement Act in 2016 and amendments to Public Procurement  Rules in 2017. The Export 
Import Management Act is being amended and Safeguard, Antidumping & Countervailing bill has 
been drafted. Similarly, to support export promotion and Special Economic Zone Rules, 2017 have 
been brought about. Sectoral reforms have  been made through the introduction of Agricultural 
Development Strategy, 2015, National Mining Policy, 2017, and Information and Communication 
Technology Policy, 2015. In the electricity sector, reform has been introduced through the 
enactment of Electric ity Regulatory Commission Act, 2017 and subsequent regulations are under 
preparation.  
6.2  Structural  Reforms  
6.3.  Nepal has carried out transformative structural reforms with the promulgation of the 
Constitution and enhanced development diplomacy. A key focus has been on transit and 
connectivity, including signing of Transit Transport Agreement with China, signing of MoU on Belt 
and Road initiative, PTA with India, additional transit port (Visakhapatnam) of India. The issue of 
power shortage has been addressed and at present there is no more load -shedding. A key 
development was the operationalization of electronic e -GP system by Public Procurement 
Monitoring Office (PPMO). Similarly, the Government has introduced online business firm 
registration system. Nepal trade  information portal has also been functional. Nepal 's parliament 
has ratified the Trade Facilitation Agreement (TFA) as well as the Revised Kyoto Convention (RKC).  
Hence, through its various efforts, Nepal has shown its commitment to Multilateral Trading S ystem 
and moved in the direction of transforming its economy structurally.  
6.3  Customs Reforms  
6.4.  Various customs -related policies and institutional reforms have been carried out for trade -
facilitation. The Government through Department of Customs (DOC) has been introducing Customs 
Reform and Modernization Strategies and Action Plan (CRMSAP) since 2003. Implementation of the 
5th CRMSAP started in 2017 and continues until 2021. The 5th CRMSAP envisions essential reform 
strategies, including, expedited legitimate tr ade facilitation, enhanced customs automation & data 
management, streamlined coordinated border management, organizational restructuring to 
support risk -based clearance, among others.  
6.5.  E-Customs master plan has been implemented. Web -based ASYCUDA world syst em has been 
implemented in 15 customs offices, covering about 98% of total trade. Implementation of the 
system in the remaining five customs office s is in the process. The development of Nepal National 
Single Window (NNSW) is in progress and is expected to  be completed in 2019. Risk -based 
selectivity module (green, yellow and red channel) has been implemented. Moreover, Trade 
Facilitation Committee as well as Client Service Centre has been formed at DOC and Customs 
Offices. Following Nepal 's ratification of  the TFA in January 2017, Nepal acceded to the RKC in 
February 2017, and the parliament has ratified the RKC. This shows Nepal 's commitment in 
implementing modern and effective Customs procedures adapted to the international trade 
environment and its effor ts towards trade facilitation.  
6.4  Reforms Related to Trade Infrastructure  
6.6.  Nepal has been able to significantly improve its trade related infrastructure. To simplify 
customs clearance procedures and make more efficient for trade facilitation, Integrated Check 
Posts (ICPs) are being built in main border -crossing points between India and Nepal, namely 
Bhairahawa (Rupandehi), Nepalgunj (Banke) and Biratnagar (Morang). The ICP Birgunj came into 
operation during the review period. While, Nepal also has four Inland C ontainer Depots (ICDs) in 
operation, namely Bhairahawa, Birgunj, Biratnagar and Kakarbhitta (Jhapa), three are under 
construction in Chobhar (Kathmandu), Timure (Rasuwa) and Tatopani (Sindhupalchowk), and a 
feasibility study is being conducted for addition al port in Dodhara Chandani. While Birgunj is 
railway -linked with Indian seaports, all other ICDs are road -based. Moreover, Electronic Cargo 
Tracking System (ECTS) has been introduced in the traffic in transit of Nepal passing via India. WT/TPR/G/381 • Nepal  
 
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  Under this system,  movement of Nepal bound cargo can be tracked so as to increase their 
time-efficiency.  
6.7.  Recently, Nepal and India have also agreed to review Trade Treaty, Transit Treaty and 
Railway Service Agreement which will help in addressing issues related to transit a nd trade. Nepal 
has also carried out reforms to improve roads that are most important for trade. The work for 
constructing Fast Track (Nijgadh -Kathmandu) has begun. Other roads such as Jogbani -Dharan, 
Kohalpur -Nepalgunj, Bhairahawa -Butwal, and Narayanghat -Mungling are being improved.  
6.8.  Nepal has taken reform initiatives in the areas of inland waterways. Nepal concluded a 
landmark agreement with India to develop inland waterways for cost -effective and efficient cargo 
movement, within the framework of trade and  transit arrangements, providing additional access to 
sea for Nepal. Work is already under way to carry out relevant study on both sides. Moreover, with 
an aim to bring waterways of 200 kilometres in total length into operation in Koshi, Gandaki and 
Karnal i rivers within the next five years, Nepal is preparing necessary policies, laws and 
institutional arrangements.  
7  TRADING ARRANGEMENTS  
7.1  Bilateral - Trade with India, China and Bangladesh  
7.1.  Nepal envisages balanced and responsible international relations that r espect various 
bilateral, regional, and multilateral agreements. It believes in maintaining amicable and mutually 
beneficial trade relations with its neighbouring countries, China and India which are its largest 
trading partners. Nepal and India share open  borders and have a multi -dimensional friendly 
relationship in various economic spheres, with trade and transit being core elements. India is not 
only Nepal 's largest trading partner with almost two -thirds of share in Nepal 's total trade but also 
the large st market for Nepali goods consisting of almost 57% of its total export. Total trade 
volume with India in FY 2016/17 was NRs 687.52 billion out of which Nepal 's exports to India was 
worth NRs 41.5 billion whereas imports were NRs 646.02 billion. Major prod ucts exported to India 
are coffee, vegetables, cardamom, juices & iron and steel whereas major imports are fuel 
(petroleum, diesel, and kerosene), vehicles & cement clinkers, etc. Nepal 's trade deficit with India 
has been an increasing challenge, a fact th at is recognised by both governments. Therefore, 
efforts are underway to revise the terms of various bilateral co -operations to make bilateral 
relations more equal and respectful and undertake various reforms to modernize and align trade 
relations with cur rent requirements of international trade.   
7.2.  Trade and investment relations with China has significantly grown in recent years. In fact, in 
the first eight months of FY 2017/18, Chinese investors constituted 28.7 percent of the total 
number of industries that got approval for foreign investment. China is Nepal 's second largest 
trading partner. Total trade volume with China in FY 2016/17 was NRs 135.23 billion out of which 
total exports to China was worth NRs 2.04 billion and imports were NRs 135.23 billion . Major 
products exported to China are essential oils, base metals, carpets, sugar etc. and major products 
imported are electrical equipment and machinery, nuclear reactors, boiler, fertilizers, telephone, 
etc. The Government expects new avenues of bilater al collaboration following the signing of the 
MoU on Co -operation under BRI 2017 and further bilateral understandings agreed this year. In 
particular, areas such as infrastructure and cross -border connectivity are expected to be enhanced 
through the co -operation.  
7.3.  Bilateral trade relations with Bangladesh gained momentum after the operationalization of 
Kankadbhitta -Phulbari -Banglabandh  transit route, and over the years Bangladesh has increasingly 
been an important trade partner of Nepal. In FY 2016/17, trad e volume with Bangladesh stood at 
NRs 5.28 billion out of which exports comprised NRs 1.05 bi llion and imports comprised 
NRs 4.23 billion. Major products exported to Bangladesh are lentils, vegetables and major products 
imported are juice, jute, medicaments etc. Nepal is working together with Bangladesh to enhance 
trade cooperation, including power trade and to narrow down trade imbalance.  
7.2  Regional - SAFTA and BIMSTEC  
7.4.  Nepal has joined two regional agreements -South Asian Free Trade Area (SAFTA) an d Bay of 
Bengal Initiative for Multi -Sectoral, Technical and Economic Cooperation (BIMSTEC). While SAFTA WT/TPR/G/381 • Nepal  
 
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  focuses on the South Asian region, BIMSTEC connects South Asia with South East Asia. The SAFTA 
Agreement, which succeeded South Asian Preferential Trad e Agreement (SAPTA), was signed in 
2004 and came into force from 2006. It aims to deepen trade and economic cooperation among 
member countries by promoting fair competition through removal of barriers to facilitate cross -
border movements of goods. During t he last review period, SAFTA members had gradually been 
reducing tariff to 0 -5% on all tariff lines except the sensitive lists as per trade liberalization 
program of the Agreement. The sixth meeting of the SAFTA Council in 2012 took the initiative to 
reduc e the number of products on the sensitive lists by 20%; Nepal has already achieved the 
relevant target by 2014. Similarly, during the 16th Summit in 2010, the SAARC Agreement on 
Trade in Services (SATIS) was signed which came into force with effect from 20 12. SATIS  
recognises the regional growth potential of trade in services an d is focused on expanding 
intra-regional investment and trade liberalization.  
7.5.  BIMSTEC was founded in 1997 for accelerated growth through cooperation in various areas of 
shared inter est. Nepal joined BIMSTEC in 2004, the year in which a framework agreement with 
provisions of liberalizing trade in goods and services and negotiating agreement related to cross -
border investment facilitation was also signed. In 2016, BIMSTEC came up with the Outcome 
Document  and 16-point Agenda of Action  highlighting priority actions to be implemented. Recent 
meetings have seen members re -affirm their commitments to finalize agreements in various 
sectors. Energy co -operation has been a key feature of BIMST EC agenda. The process of 
negotiations for reducing and eliminating tariff is underway. Nepal has been playing a significant 
role in giving momentum to BIMSTEC and is hosting BIMSTEC Summit, the highest policymaking 
body in BIMSTEC, in August 2018.  
7.3  Multila teral Trading Arrangements  
7.6.  Nepal is a strong supporter of Multilateral Trading System (MTS) and believes in rule -based, 
transparent, and predictable MTS. Despite various constraints, Nepal has been engaging actively in 
the WTO and continuously fulfilling i ts obligations since its accession to the WTO in 2004. Nepal is 
also resolutely representing LDCs group at the WTO. Currently, it is working as a focal point on 
Trade Facilitation within LDCs group. Similarly, it is taking part in various development activ ities 
for the LDCs, including Aid for Trade (AfT) initiatives. Nepal is also in the process of implementing 
the various measures from TFA Section 1 as mandated by the agreement. Nepal has already 
notified Categories A, B, C as per the agreement to the WTO for the implementation of TFA. The 
Government perceives TFA as an opportunity to reduce costs and time related to trade and transit. 
Nepal has been adopting open and liberal economic policies and is committed to world trading 
system. However, Nepal's expor t performance could not be improved as per the expected level. 
The country's export import ratio 1:2 in 2004 (while accessing to the WTO) increased to 1:14 in 
2018.  
8  CONSTRAINTS  
8.1.  Nepal still faces several constraints to economic growth, some of which are be ing addressed 
through the Government 's sincere efforts while others continue to be challenging for its 
development. Nepal 's most serious constraint is its geography. On the one hand, trade and transit 
costs are higher for Nepal as it is a landlocked countr y. On the other hand, Nepal 's difficult terrain 
due to geophysical features of high mountains and hills adds to the costs of developing 
infrastructure, promoting production, and doing business.  
8.2.  Supply -side capacity constraints as well as trade deficit and non-diversified nature of trade 
have remained key challenges for Nepal. In the last five years, trade deficit has nearly doubled. In 
fact, share of total export in the GDP has halved from about 10% to 5% in the past decade. The 
liberalization of the extern al sector increased imports. However, various constraints have held back 
Nepal from successfully exporting products with comparative advantage, at the same pace. 
Increasing consumption pattern, low level of production and productivity, heavy reliance on im port 
of raw materials and fuel, and export of low value products, among others are some of the key 
contributors to ballooning trade deficit. Moreover, Nepal relies heavily on two major trading 
partners, India and China, and trade deficit with both has wide ned. 
8.3.  Nepal 's trade performance has also been affected by inadequ ate economic, social, and 
trade -related infrastructure. Challenges included in the areas of road infrastructure, vocational and WT/TPR/G/381 • Nepal  
 
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  technical education and certification mechanisms. Nepal is yet t o fully utilize its potential for 
exporting various products by making use of concessional market access provided by many of its 
trading partners. Moreover, Nepal has not been able to take full advantage of incentives provided 
to LDCs, including GSP and DF QF initiatives, mostly because of stringent and complex 
requirements that needs to be fulfilled as an exporting country, and partly due to supply -side 
constraints.  
8.4.  Nepal is committed to overcoming trade -related infrastructure challenges to fully utilize it s 
export potential and productive capacity. This would require significant investments. Despite AfT 
initiatives through the WTO, interest and support from development partners (DPs) for helping 
Nepal achieve its trade -related ambitions could be further enh anced. Moreover, various difficulties 
related to effective implementation of AfT in Nepal have been noted. Some of them are: disparities 
in the demand and supply of support, gaps in the levels of commitment and disbursement, poor 
coordination and duplicati on of donors ' programmes, and lack of sustainability. Similarly, AfT has 
been more focused on soft part while Nepal continues to face challenges related to productive 
capacity and trade related infrastructure.  
9  OPPORTUNITIES AND WA Y FORWARD  
9.1  Political Stability 
9.1.  Nepal 's entry into an era of political stability represents an enormous opportunity for 
economic growth and sustainable development. The promulgation of the Constitution in 2015 
followed by elections at all three levels has addressed long -held politica l aspirations and the 
country is now focused on achieving socio -economic prosperity. Political stability also opens an 
opportunity to strengthen further global partnership that would significantly contribute to achieving 
Sustainable Development Goals (SDGs ) and also reaching to middle income country by 2030 along 
with graduation from the LDC status.  
9.2.  The Government has presented its vision for Nepal 's transformative economic growth and 
aims to create an economy that fosters innovation, trade and investment. To support this vision, 
going forward, Nepal is firm in protecting, strengthening and positively utilizing democratic 
achievements. The Government aims to build a country that is free from any type of corruption, 
and that respects human and fundamental rig hts. To this end, Nepal has vowed to adopt policy of 
zero tolerance against corruption. Nepal is already taking measures to break restrictive business 
practices.  
9.2  Macroeconomic Stability and Restructuring  
9.3.  Nepal has been able to maintain a stable economic e nvironment even after facing natural 
disasters, trade disruptions and changes in government structure. This portrays the resilience of 
Nepal 's economy and provides opportunities to thrive for people and enterprises. With overall 
positive outlook to trade, economic growth and minimized macroeconomic risks, opportunities for 
trade and investment are bound to grow. The Government aims to double Nepal 's per capita 
income in five years ' time. Rising income of Nepali will increase Nepal 's market size and create 
profitable investment opportunities. Most importantly, the Constitution provisions for reallocation 
and redistribution of resources among various levels of governments on the recommendation of 
the National Natural Resources and Fiscal Commission. This ensur es equitable distribution of 
resources, promotes balanced growth, maintains fiscal discipline and efficiency of the 
governments, increases economic activities and creates further trade and investment opportunities 
across the country.   
9.4.  Further restructuring  of the economy is essential. This can be achieved by increasing 
contribution of industrial output in the GDP, doubling agricultural production in the next five years, 
transferring additional workforce from agriculture to industry and service, and encourag ing 
investments in all sectors. Additionally, ensuring fiscal discipline at all levels of government, 
particularly local and provincial, is important. There is a need to use rigorous evidence in policy 
making and project prioritization. Moreover, the count ry needs to tap into the demographic 
dividend through the creation of an enabling environment for young entrepreneurs. To ensure this, 
Nepal needs to focus on areas such as extending financial access to the entire population and 
enabling creation of gainfu l jobs.  WT/TPR/G/381 • Nepal  
 
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  9.3  Conducive Trade and Investment Environment  
9.5.  Nepal has significantly reformed its trade and investment regime, further integrating Nepal 
into the global economy and presenting more opportunities for growth and investment. The 
Constitution promotes gr owth of amicable trade and investment environment, accordingly 
reviewing and revising several acts, rules and regulations. Nepal has updated its trade policy with 
a greater focus on export promotion and creating better alignment with cross -sectoral policie s. 
Moreover, improvements in intellectual property rights regime, public procurement, guarantee of 
protection for businesses, flexible labour laws, and access to foreign markets provide opportunities 
for investors. Furthermore, Nepal has been showing its s trong support and belief in the rule -based 
trading system and commitment towards an open and liberal economic policy.  
9.6.  It is important to carry out further reforms for increased investment -friendly climate. Nepal 
needs to focus its efforts on reducing cost  of doing business, especially by improving its trade and 
industrial infrastructure. Moreover, there is also a need to accelerate the process of legal reforms 
particularly in the area of trade and investment. Realizing the risks of alarming trade deficit, 
Government aims to enhance exports capacity through various measure including supply side 
capacity enhancement and import management.  
9.4  Energy and Infrastructure Development  
9.7.  Nepal has abundant opportunities in energy sector, especially in hydropower, and 
infrastructure development. Nepal has put a heavy emphasis on achieving double -digit growth 
which needs increased investments in large infrastructure and energy projects. The Government 
has plans to develop transport infrastructure, including railways, water ways, airports, 
expressways, tunnel ways, and cable cars and energy infrastructure, including mega 
hydroelectricity projects, transmission lines along with expansion, reinforcement and 
modernisation of distribution system. Recent reforms in financial secto r have encouraged the 
establishment of Infrastructure Development Banks in collaboration with the private sector, 
introduction of new instruments in financial services such as blended financing, private equity, 
venture fund, hedge fund, credit rating, amon g others are expected to support the development of 
hydro power and infrastructure.  
9.8.  In order to exploit the available opportunities, various policy reform especially on PPP law, 
improving mega project management, enhancing coordination among government ag encies 
concerned and stakeholder, and participation and support of people are essential.  
9.5  Improved Economic Diplomacy  
9.9.  Increased connectivity and improved bilateral, regional, and multilateral relations through 
economic diplomacy provides Nepal with a lot of opportunities. Nepal signed important agreements 
for trade and transit connectivity and investment facilitation with  its neighbouring countries. Nepal 
also signed the BBIN MVA along with Bangladesh, Bhutan and India to further strengthen sub -
regional connectivity. These initiatives present better access opportunities to tap into the huge 
market of neighbouring countries  as well as regional and global markets. Significant steps have 
been taken for increased energy co -operation. Nepal has signed PTA with its neighbouring 
countries and also SAARC Framework Agreement on Energy Cooperation at regional level. Nepal 
has been pl aying an active role in WTO in order to advancing the agenda of rule based trading 
system.  
9.10.   Nepal needs to work with its neighbours and regional partner countries to further enhance 
bilateral and regional cooperation. Nepal 's focus needs to be on accelerati ng the implementation of 
various bilateral agreements. Nepal also needs to take a lead role in realizing the aspirations for 
increased regional connectivity and cooperation through effective implementation of regional 
agreements.  
9.6  Governance Reform  
9.11.   Nepal 's transition from a unitary form of government to a federal structure presents 
unprecedented opportunity to make public service delivery more responsive. It is also likely to 
provide more opportunities for doing business in a stable policy environment. The r eformed WT/TPR/G/381 • Nepal  
 
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  governance structure is expected to improve economic policy -making and performance via greater 
emphasis on local opportunities and challenges. In fact, provincial governments have already 
started to take initiatives in attracting businesses through  various incentives, presenting new 
opportunities for investors and businesses.  
9.12.   Restructuring of Government ministries in line with the constitutional provision has been 
carried out and MoICS has been formed by merging the then three ministries, which has also 
become supportive to ensure all intervention in trade, industry and investment complementing 
each other. In this context, several laws and rules related to trade and investment regime are 
being reviewed and reengineering of institutions is being carri ed out which will help Nepal navigate 
better in a changed governance context.  
9.13.   Against this background, it is important to leverage digital technology for improved 
governance. There are already some government agencies and services that are integrated into  
digital technology. To realize the aim of a 'Digital Nepal ', it is crucial that more government 
agencies provide services digitally as well.  
9.7  Trade Facilitation and Infrastructure  
9.14.   Significant developments have taken place in the areas of trade facilitation . Nepal has 
signed trade and transit agreements with its neighbouring countries. Nepal has also ratified the 
WTO TFA. Nepal 's participation in such initiatives helps facilitate trade and investment. The 
improvements in trade related infrastructure provide Nepal opportunities to charter a path of high 
economic growth through trade and investment in the coming years.  
9.15.   As a landlocked developing country (LLDC), geographical constraints have significantly 
contributed to Nepal 's under performance in trade, depri ving Nepal from its rightful share in the 
global trading system. The Vienna Programme of Action would be instrumental in addressing this 
fundamental problem with a focus particularly on trade and transit facilitation, once implemented 
effectively. Similarl y, it is very pertinent to intensify the implementation of the TFA agreement.  
9.8  Aid for Trade 
9.16.   AfT is complementary initiatives that can help Nepal achieve its SDG goals by 2030. Nepal 
can only be benefited by AfT through a very effective and sustainable mech anism with an 
improved donors' coordination and national ownership. It is crucial that the support provided by 
AfT is harmonized along with the Government 's vision and priorities. AfT needs to focus on 
development of trade related infrastructure. Nepal has  been benefiting from the WTO/ Enhance 
Integrated Framework (EIF) and it expects continuous support for trade capacity building of the 
country.  
9.9   E-Commerce  
9.17.   Nepal 's success in expanding access to ICT to a large section of the population presents 
unparallel ed opportunities for growth in the area of e -Commerce. E -Commerce can bring down 
traditional socio -cultural, economic and geographical barriers and help bringing Nepal closer to the 
world. In this way, e -Commerce, through its effective network, can help Ne pal transform itself into 
a middle -income country and attain SDGs by 2030.  
9.18.   Increased investment in e -infrastructure is required to ensure wider geographic coverage. It 
is also imperative to develop and bring into use National Payment Gateway. The  developme nt of 
e-Commerce also needs to be facilitated by an effective delivery mechanism. Small and medium 
enterprises also need support to carry out e -Commerce by ensuring secure internet services and 
hence effective cyber -security guidelines need to be developed  and implemented.  Finally, a 
supportive legal framework, one that matches the pace and dynamism of e -Commerce 
development, is required.  WT/TPR/G/381 • Nepal  
 
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  10  CONCLUSION  
10.1.   Nepal has continuously fulfilled its international obligations and has been engaging actively 
in the WTO. It is committed to utilizing international trade to meet its sustainable development 
objectives. Since the last TPR in 2012, Nepali economy has undergone many challenges, not least 
the earthquakes in 2015 and the subsequent trade disruption.  Nepal was heavily  impacted in the 
immediate aftermath but has already shown significant recovery. With the promulgation of the 
Constitution in 2015 and the election of stable governments at all three levels: federal, provincial 
and local, Nepal has committed to structurall y transforming its economy to make it production -
focused, employment -generating, self -sufficient, and export -oriented. The various initiatives and 
reforms carried out during the review period add further avenues for achieving socio -economic 
development.  
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