WORLD TRADE  
ORGANIZATION   
WT/TPR/M/257 
16 April 2012 
 (12-1981) 
Trade Policy Review Body 
13 and 15 March 2012  
 
 
 
TRADE POLICY REVIEW 
 
NEPAL 
 
Record of the Meeting 
 
Chairperson:  H.E. Mr. Eduardo Muñoz Gómez (Colombia) 
 
 
  Page 
 
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3 
II. OPENING STATEMENT BY THE REPRESENTATIVE OF NEPAL  5 
III. STATEMENT BY THE DISCUSSANT 9 
IV. STATEMENTS BY MEMBERS 12 
V. REPLIES BY THE REPRESENTATIVE OF NEPAL AND ADDITIONAL 
 COMMENTS  26 
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 32 
 
 
 
Note:   Advance written questions by WTO Me mbers and the replies provided by Nepal are 
reproduced in document WT/TPR/M/257/Add.1 and will be available online at:  
http://www.wto.org/english/tr atop_e/tpr_e/tp_rep_e.htm.    WT/TPR/M/257 
 Page 3 
 
 
  I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 
1. The first Trade Policy Review of Nepal was held  on 13 and 15 March 2012.  The Chairperson 
H.E. Mr.  Eduardo Muñoz Gómez (Colombia) we lcomed the delegation of Nepal headed by 
H.E. Mr. Lal Mani Joshi, Secretary of the Minist ry of Commerce, and the discussant, Mrs. Christine 
Hochstatter (Germany).   
2. The Chairperson recalled the purpose of the Trad e Policy Reviews and the main elements of 
the procedures for the meeting.  The report by Nepal was contained in document WT/TPR/G/257 and 
that of the WTO Secretariat in WT/TPR/S/257. 
3. Questions by the following delegations had been  submitted in writing at least two weeks in 
advance and had been transmitted to  the delegation of Nepal:  the Un ited States, Australia, Japan, the 
European Union, China, Pakistan, and Paragua y. The following dele gations submitted written 
questions after the two-weeks deadline:  Ar gentina, Thailand, Turkey and India.   
4. The Chairperson observed that the reports pr epared for this meeting by Nepal and the 
Secretariat noted that Nepal was transforming its economy to rely more on services and industry, by unilaterally liberalizing its trade a nd investment regimes.  Nonetheless, both reports also indicated that 
the desired changes through trade policy reforms had not been fully achieved.  The economic 
performance faced political instability and supply-side  constraints, such as energy shortages, poor 
infrastructure, and labour strikes.  He noted that  Members would be interested to learn more from 
Nepal about the measures being considered to cr eate a more business friendly environment and help 
its exporters to become more competitive. 
5. Overall, this Review provided an opportunity to exchange views on matters of interest to all 
Members.  In his view, these included: 
 Agriculture plays a key role in creating j obs and the Government sees opportunities to 
broaden agricultural exports.  Could Nepal explain in greater detail its agricultural 
policies so that the sector becomes more  productive, satisfies domestic needs and 
increases exports. 
 The 2009 Trade Policy is being implemented through the 2010 Trade Integration 
Strategy, which aims to strengthen Nepal' s capacity to benefit from trade-related 
technical assistance and aid for trade, and promote 19 priority export sectors.  Members would like to learn more about the role of trade policy in developing Nepal's economy. 
 Because of the high cost of doing business and the fact that certain sectors are 
reserved for national investors, Nepal attr acts limited FDI inflows.  A frequently 
asked question among delegations is what ac tions Nepal intends to take to attract 
larger FDI inflows. 
 Members have also expressed interest in l earning more about the authorities' steps to 
review export taxes.  Levying export tax es discourages export of these products, and 
may not be the best way to achieve  the Government's objectives.   
 Nepalese exporters find it difficult to compete in global markets due to weak 
standardization and conformity assessment infrastructure.  Nepal lacks an 
accreditation system and sufficient testing facilities.  Its traditional agriculture exports 
(such as honey) have been subject to rest rictions in the international market.  WT/TPR/M/257 
Page 4  
 
  Members would like to know what facilitation measures can help Nepal overcome 
these problems. 
 Nepal's government procurement regime f aces some problems and compliance with 
the procurement legislation has been limite d.  Perhaps Nepal might elaborate on its 
plans to further improve the implementation and monitoring of its public procurement 
legislation. 
 The authorities might like to elaborate on m easures they intend to take to further 
improve IPR implementation and enforcem ent, including initiatives and campaigns 
on IPR promotion.  WT/TPR/M/257 
 Page 5 
 
 
  II. OPENING STATEMENT BY THE REPRESENTATIVE OF NEPAL 
6. My presentation this morning will mainly focus on three principal aspects: Nepal's trade and 
investment environment; major policy, legal and institutional reforms Nepal has made after accession 
to WTO; and our constraints, challenges and opportunities.   
7. Situated between the two fastest growing Asian economies, namely India and Peoples' 
Republic of China, Nepal is predominantly a m ountainous, landlocked country . Despite its smaller 
geographic size, Nepal is immensely rich in biodi versity and treasured with rich cultural heritage. 
Nepal is also rich in water resources and it has im mense competitive advantage in tourism industry.  
Traditionally, it has been a poor agrarian country. Manufacturing and service sector are emerging recently.  
8. Nepal's membership to the WTO in 2004 was a mi lestone that accelerated the process of an 
open, liberal and competitive trade regime. In th e process of joining the WTO and then as a Member, 
Nepal has pursued prudent structural reforms in all areas of economy and made considerable progress 
in economic liberalization that include, among others , reducing tariffs and qua ntitative restrictions on 
imports. It has maintained liberal investment re gime and has opened up a wide range of economic 
sectors for foreign investment. Its macroeconomic  fundamentals have remained fairly good.  
9. In an effort to liberalize economy, customs duties have been rationalized and brought down 
substantially. Nepal's tariff rates are one of the lowest in South Asia. The Government has bounded 
99.4% of tariff lines at HS 8 digit level; reduced ta riff-slabs and rates (currently simple tariff average 
is 12.1% and tax slab is seven including zero slab);  abolished different non-tariff barriers; introduced 
Value Added Tax; applied HS codes for Cust oms Tariff; used the WTO Customs Valuation 
Agreement; enacted new Customs Act, Rules a nd regulations to enhance transparency and 
simplification of process; limited import restrictions to safeguard health, environment, security and 
archaeological properties; and rolled out ASYCUDA to major customs offices by using Broker Modules and Selectivity Modules.  
10. Reforms have also been made in foreign exch ange regime and there is no foreign exchange 
control on the current account. Exchange rate of the Nepalese currency with  convertible currencies 
has been left to market forces w ith the exception of the Indian rup ee, for which the central bank of 
Nepal fixes the exchange rate. Exporters are a llowed to borrow in foreign currency. Commercial 
banks are also allowed to retain any amount of foreign exchange.  
11. Timely changes and adjustments have been made  in industrial policy and foreign investment 
and technology transfer policy. Foreign investment, both direct and portfolio, are encouraged. 
Restrictions on repatriation of foreign capital have  been removed. Single window facility has been 
provided to both domestic and foreign investors. 
12. The Government of Nepal has introduced new trade policy in 2009 with the objective of 
enhancing contribution of trade sector to th e national economy, thereby support the economic 
development and poverty alleviation.   The Government, with the suppor t of development partners, has 
also introduced Nepal Trade Integration Strategy 20 10, which aims to address the challenges related 
to export promotion. NTIS has explicitly identified 19 products as highly potential areas for export. 
13. FDI is one of the important means to tran sfer home capital, technology and technical 
knowhow. Nepal has introduced several policy measures to increase the flow of foreign investment 
into the country. Recently, Board of Investment  has been constituted under the Prime Minister's 
chairmanship. The Board aims to create an inv estment friendly environment for both domestic and 
foreign investors. For this, it plans to offer one-window solution - an investor should be able to 
receive all services from the same place including registration, licensing, immigration issues and bill WT/TPR/M/257 
Page 6  
 
  clearance. The Government has declared FY 2012/13  as the National Investment Year by offering 
various incentives for foreign investment.  With a view to ensure that foreign investment is secure in 
Nepal, the Government has concluded Bilateral Investment Promotion and Protection Agreements 
(BIPPA) with six countries including India. Sim ilarly, Double Taxation Avoidance Agreement has 
been signed with major trade partners.  
14. Processes towards establishing Special Economic Zone (SEZ) in major business hubs of the 
country have been initiated. Initiatives have been ta ken towards establishing integrated checkpoints in 
major customs, thereby smoothening import and e xport. The Department of Customs has initiated 
reform program on automation and is planning to provide a web based clearance system.  
15. We have also undertaken financial and moneta ry sector reforms. The enactment of Nepal 
Rastra Bank Act 2002 accords functional autonomy to the central bank. Interest rates have been 
deregulated; credit ceilings and margin requirement s have been removed. The number of commercial 
banks has multiplied as a result and so have fina nce companies, credit cooperatives and insurance 
companies. The deposit mobilisation has increased to almost half of the GDP.  
16. Trade is a means to foster economic growth and alleviate poverty by generating employment 
and livelihood opportunities. The Government has take n trade as an effective tool to reduce poverty in 
the country and to enhance well-being of its people. With this conviction, it has accorded high priority 
to trade and has mainstreamed trade into  its development plans and programs.  
17. Private sector is an important player of trade and the Government's role is to regulate and 
facilitate trade as well as help expand trade in  international markets by securing market access 
through effective bilateral and mu ltilateral trade negotiations. The Gove rnment has privatized most of 
the public enterprises, opened many sectors to private business and amended relevant laws and 
regulation encouraging the private sector. 
18. India is the largest trading partner of Nepal.  Nepal signed a Trade Treaty with India in 1960 
and significant review was made in 1996. A comprehensive revision of the trade treaty was done in 2009. Nepal has signed bilateral trade agreements with China, Bangladesh, Sri Lanka, Pakistan, UK, 
USA, DPR Korea, Republic of Korea, Egypt, Mongol ia, and Romania. Nepal has joined two regional 
agreements – Agreement on South Asian Free Trad e Area (SAFTA) and Framework Agreement on 
the BIMST-EC (Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation) Free Trade Area in 2004.  
19. Nepal is in the transformation process m oving its economy away from predominantly 
agricultural sector to service and industrial sectors. Se rvice sector is growing satisfactorily and shares 
around 50% of GDP. It absorbs around 18% of total employment. Trade in services accounted for 
69.9% of total convertible foreign exchange earnings whereas merchandise trade shared 13.1% on 
average during the period between 2004/05 and 2010/ 11. The share of service trade income in total 
trade income is 72.6% in 2010/11. Tourism, hydro-electricity, ICT, and education are potential subsectors within the service sector that have huge potentiality of growth in Nepal. Inadequate skilled 
human resources, low investment, primitive technolog y, inadequate infrastructure, frequent labour 
unrest and long political transition are some of the major challenges to be addressed though.  
20. Agriculture is the backbone and job machine of an LDC economy. In Nepal, currently, 
agriculture sector contributes around 33% of GDP and 66% of total employment. It is a major source of livelihood and income for the people, in particular  to the rural inhabitants. Agriculture is also a 
source of major tradable items as well as industrial raw materials. Low productivity, subsistence level 
small farming, land fragmentation, primitive technol ogy; inadequate infrastructure in particular, 
energy crisis, scant irrigation facility and rural road s are some of the challe nges that the agriculture 
sector faces.   WT/TPR/M/257 
 Page 7 
 
 
  21. Despite efforts, we are yet to make satisfact ory progress in manufacturing sector. The average 
growth of manufacturing sector over the last decade  was just around 0.3% and its contribution to total 
GDP declined to 6.5% in 2010/11 from 16.6% in 2004/05. 
22. Nepal faces a number of challenges and constr aints in its efforts to promote trade and 
development. Like other LDCs, firs t and foremost challenge of Nepal's trade sector relates to limited 
productive capacities and structural weaknesses which impede their growth prospects and constrain 
ability to produce. Building productive capacity ca lls for investments in infrastructure, human 
resources as well as technology and innovation. Prod uctive capacity leads to trade diversification and 
structural transformation, thereby leading to a mo re beneficial integration into the global economy. 
23. Other associated challenges include geographi cal location, difficult terrain, insufficient 
market information, limited export basket, inadequa te skilled human resources, weak labour relation, 
long political transition, primitive technology, inade quate basic infrastructure, including energy, 
standardized laboratories and transport as well as insufficient trade related technical and financial assistance. Furthermore, the available limited transit corridor through India with moderate transport infrastructure also indicates the situation of doing business in Nepal. To overcome these constraints, 
the Government and development partners should come  together through, among others, aid for trade 
process or other appropriate bilate ral and multilateral processes to meet the requirements in particular 
building requisite infrastructures and avail facilities of standardized laboratories.  
24. The NTIS has identified four major challenges of its export trade, which includes ensuring 
proper market access, building domestic support in stitutions, strengthening the supply capacities and 
mobilizing overseas development assistance. In orde r to overcome these challenges, the strategy has 
set four major objectives: strengthening trade nego tiations (especially bilateral); strengthening the 
technical capacity of domestic non-tariff ba rriers and other business environment supporting 
institutions; strengthen the export capacity of "i nclusive" export potential goods and services, and 
strengthening the Government's capacity to co ordinate and manage Tr ade-Related Technical 
Assistance (TRTA) and Aid for Trade to implement the NTIS. The Government has formally adopted 
NTIS as its mid-term national trade development strategy.  
25. Nepal is trying its best to make the effective use of trade related foreign assistance. With the 
assistance of EIF, Nepal has established a National Implementation Unit (NIU) in the Ministry of 
Commerce and Supplies. Several pr ograms have been launc hed under EIF Tier 1 project to develop 
the capacity of NIU. Similarly, some Tier 2 projects have been prepared and approval process is undergoing. Nepal with the close coordination of  development partners has formed a donors' 
coordination committee and currently GIZ has assu med the role of donor facilitator. Several 
committees and subcommittees have been established to  monitor and supervise the implementation of 
TRTA at the expert level a nd senior official level.  
26. The Government of Nepal finds it important to  scale up fund in EIF and AfT to enhance their 
effectiveness and efficiency in meeting the growing needs of resources for LDCs. The support 
currently being provided by EIF is inadequate co mpared to the needs of LDCs, like Nepal. it is 
equally important to simplify EIF process. Given the importance of productive capacity in LDCs, AfT 
should focus its resources in infrastructure deve lopment. The implementation of AfT should be 
guided by predictability and transparency.   
27. Nepal firmly believes that mobilization of aid should be guided by the agreed principles 
including Paris Principles and Accra Agenda of Ac tions. Demand driven aid and direct budgetary 
support are most effective ways to ensure th e optimum utilization of foreign assistance.  
28. Nepal considers rules based and non-discriminat ory multilateral trading system as the bedrock 
of trade regime and reiterates its commitment to it as an article of faith. Nepal, being the first LDC to WT/TPR/M/257 
Page 8  
 
  join the Organization through the accession process, a ttaches great importance to the functioning of 
the WTO. It has made best efforts to implement commitments and to accelerate legal reform as well 
as human resource development in compliance with WTO provisions. The Government of Nepal is 
striving to foster and support a vigorous and co mpetitive private sector and to develop Nepal as 
an attractive destination for trade and investment.  
29. Nepal stands today at a crucial juncture of  political transformation and alongside, much 
needed socio-economic transformation. Economic agenda has a great bearing on the success of political transformation. While expressing deep appreciations to the international community, 
including WTO, for their valuable support, the Government of Nepal would like to invite them to continue and scale up such support in these critical  times and contribute to make Nepal a peaceful, 
stable, democratic and prosperous country for regional and global peace,  security, stability and 
prosperity.  Nepal's economic and tr ade policies will continue to rema in open to foreign investors and 
partners. We will continue efforts to  enhance competitiveness of economy.  
30. Nepal is concerned over the continued deadlock  in the Doha Round of trade negotiations. We 
strongly feel that the impasse should not lead to a further marginalization of the most vulnerable 
group of economies.  We therefore reiterate the call for early harvest of the LDC package that covers, 
among others, full implementation of  duty-free and quota-free (DFQF) ma rket access, associated rules 
of origin, the MFN service waiver for LDCs.   WT/TPR/M/257 
 Page 9 
 
 
  III. STATEMENT BY THE DISCUSSANT (MRS. CHRISTINE HOCHSTATTER 
(GERMANY)) 
31. I would like to use this opportunity to comment Nepal on its achievements it has reached in 
the last years. Nepal was not only the first LDC to  accede to the WTO, it also bound more than 99% 
of its tariff lines and further redu ced the applied MFN tariff in the years after its accession. I will also 
try to highlight some of the major challenges of Nepa l which have to be seen in light of its geography 
and political development. 
32. Nepal became the first LDC to join the WTO thr ough an accession process in 2004. I take this 
as a clear sign that the government of Nepal re cognized the opportunities free global trade can bring 
for the country. To improve sustainable internati onal trade the country adopted its new trade policy 
in 2009 which is being implemented through Nepal's Tr ade Integration Strategy. This strategy that is 
implemented within the Enhanced Integrated Fr amework contains currently 19 priority areas for 
export. However, despite these ongoing efforts the economic development of Nepal has not been as 
good as expected and a strong economic development is  still missing. Unfortunately, Nepal's balance 
of trade has worsened within th e last years. There is a multitude of reasons for this: Political 
instability and labour strikes were certainly unfavourable conditions for Nepal's economic 
development. 
33. Another determining factor for international tr ade is the geographical situation: Nepal is a 
landlocked country which has only two neighbours - India and the People's Republic of China. 
Whereas the border towards China lies in the Himala yan region, Nepal's border to India runs to a 
large extent in the Southern lowland plains. It is  therefore no surprise that India is by far Nepal's 
biggest trading partner, accounting in 2010 for around  66% of Nepal's exports and 57% of its imports. 
34. It seems quite obvious to me that one of the core challenges of Nepal is its weak 
infrastructure. Existing transport facilities – which ar e almost exclusively road transport and aviation - 
are far from being sufficient. In some respect th ey have even deteriorated. For example it is 
regrettable that there are no longer direct flight connections from Nepal to European destinations – a 
clear disadvantage for international trade opportuniti es. The fact that sea transport is only possible 
from ports in India makes Nepal's participation in world trade more demanding. This not only 
weakens Nepal's internal transport but also makes Nepal's exports more expe nsive and cumbersome.  
35. That the services sector is the most important driver of growth in Nepal may also be 
explained by the fact that it is not as much depe ndent on transport infrastructure as the manufacturing 
and the agricultural sector. However, Nepal is actively working on the improvement of its infrastructure: The government has completed an inte grated ten-year-sector-wide plan and a Priority 
Investment Plan for the development of strategi c roads by the year 2016. And the World Bank 
supports two projects in Nepal to improve road transport in rural areas. 
36. A further constraint to production and trade is  the shortage of energy. Although Nepal has 
enormous hydropower resources which according to  the Nepalese government are probably much 
higher than the domestic requirements, it has so far not been possible to make these resources usable. 
Therefore electricity cuts lead to repeated power cuts and loss of pr oduction. To change this situation 
several projects have been initiated with the goal to, inter alia, attract foreign investors. It would be 
interesting for us to hear from Nepal, how far these efforts have come. 
37. When Nepal acceded to the WTO it bound almost 100% of its tariff lines, made extensive 
commitments under the GATS and signed the Refere nce Paper on Basic Telecommunications. As an 
LDC this is quite a remarkable set of commitments. So far, Nepal has not participated in any dispute 
settlement procedure, either directly or as a third party. It has not taken any anti-dumping, countervailing or safeguard measures so far. Besides being a Member of the WTO, Nepal is a party to 
the South Asian Free Trade Area (SAFTA) Agreemen t and participates in the Bay of Bengal Initiative WT/TPR/M/257 
Page 10  
 
  for Multi-Sectoral Technical and Economic Coope ration (BIMSTEC). In 1995, Nepal signed a trade 
cooperation agreement with the EU. Since 2010, pr oducts from Nepal have received preferential 
treatment under the generalised system of prefer ences of the EU, Japan, the United States and other 
trading partners. Nepal has a bilateral agreement wi th India which also incorporates a Transit Treaty 
and a Treaty of Trade. Under the Treaty of Trad e, Nepal and India accord each other unconditional 
MFN treatment. They also agreed, on a reciprocal  basis, to exempt from customs tariffs and 
quantitative restrictions imports of primary pr oducts. Moreover, India agreed to exempt 
non-reciprocally industrial products manufactured in Nepal from customs tariffs.  
38. As to Nepal's tariffs, 99.3% of total lines are ad valorem . Nepal's average applied MFN tariff 
decreased from 13.8% in 2002/03 to 12.2% in 2011/12. The average final bound tariff is 26.3%. Nepal bound all but 54 tariff lines, leaving unbound mainly the lines for arms, cement, some parts and components of automobiles and petroleum oil. Nepal stated that this was for revenue collection and 
environment protection reasons.  
39. In the last years, Nepal has taken some trad e facilitation measures. The authorities point out 
that as a result thereof, customs clearance and techni cal controls for imports and exports take five and 
four days respectively (out of a total of 35 and 41 da ys). However, it has to be noted that a large part 
of the overall time is due to th e transit time to Indian ports a nd therefore cannot be influenced by 
Nepal's customs authorities. 
40. Foreign direct investments in Nepal remained lo wer than wished for. This might have been 
due to weak infrastructure, political instability and other reasons. Foreigners are permitted to own up 
to 100% in wide parts of the economy, but certain activities are reserved to national investors. These 
include inter alia personal services, retail business, travel agencies and various other services related 
to tourism, consultancy services and certain activities of the agricultural sector. Foreign direct investments have to be approved in advance. In orde r to attract more foreign direct investment, Nepal 
may wish to indicate whether it plans a further libera lisation of its investment policies, for example by 
granting non discriminatory access and providing a transparent business environment. 
41. The privatization of public enterprises has been on hold since 2008. In this context, I would 
like to encourage the Nepalese government to assess the experiences with privatisation. Did the 
privatisation efforts prior to 2008 yield positiv e results? If not, what hindered the effective 
privatisation? Which steps would have to be taken in order to enhance the effectiveness of 
privatisation? Which measures, if any, does the gove rnment envisage to continue privatisation? From 
my point of view, it might be helpful to furthe r increase the role of the private sector overall, 
including foreign investors. In this regard a revi sion of the competition law that does not apply to all 
kind of business, and of the protection of in tellectual property might be a helpful step. 
42. Nepal is not a party or an observer to the pl urilateral Agreement on G overnment Procurement. 
It is estimated that some 60 to 70% of the annual national budget goes to public procurement, 
equivalent to around 13 to 15% of GDP. While Nepal issued legisla tion on Public Procurement in 
2007, a strategic study in 2010 found that the existing rules were only inadequately put into practice 
due to various problems in the implementation process. I guess Members would appreciate if Nepal 
could update the membership on the current state of the implementation. 
43. A further important element of the econo mic environment is the heavy reliance on 
remittances from abroad: wh en looking on remittances  as a share of GDP, Nepal was in 2009 the fifth 
largest recipient worldwide, according to the World Bank's Migration a nd Remittances Factbook. 
This, together with Nepal's narrow export basket, makes its economy very vulnerable to external 
shocks.  
44. Looking at the different economic sectors, Nepal's economy is still heavily reliant on 
agriculture, which accounts for 36% of real GDP and employs two thirds of the labour force. It  WT/TPR/M/257 
 Page 11 
 
 
  contributed 23% to export earnings in 2010. Agricultu re persists to a large extent in subsistence 
farming. With regard to the fact that 38 of 75 di stricts are estimated to face a food deficit it is 
understandable that the first goal of Nepal's agri cultural policy remains food security. Nevertheless, 
one of the objectives of the Agriculture Perspective Plan is transforming subsistence agriculture into 
commercial agriculture through diversificati on and exploiting comparative advantage.  
45. Nepal does not apply any tariff quotas on agricultural products and has no system of 
guaranteed prices. The simple average applied MFN rate on agriculture, hunting and fishing is a low 
9.7% while the final bound rate is considerably higher. There are practically no duties and charges 
levied on imports of agricultural products, but so me export duties exist. Nepal has not made any 
reduction commitments on domestic support, but the financial support to agricultural producers was 
below the de minimis  level of 10% for which no reduction co mmitments were required. As Nepal 
does not have any export subsidies either, its trading regime for agricultural products can be 
considered as quite open. Being an LDC Nepal en joys duty-free and quota-free access to the markets 
of most developed and certa in developing countries.  
46. The manufacturing sector contributed 6.1% to real GDP in 2010/11. This low share may also 
reflect Nepal's structural problems. Nevertheless,  Nepal aims to promote value-added industries. 
There is a rapid increase in the export of iron a nd steel products as well as of textiles. While the 
country does not provide direct payments to any manufacturing industry, it grants incentives in the 
form of income tax, VAT, excise duty and cust oms duty exemptions or deductions for certain 
manufacturing industries. The authorities state th at these incentives aim at ensuring balanced 
industrial development, with regard to different sect ors but also with regard to the country's different 
regions. It should be noted that Nepal has a cons iderable tariff escalation which results in the 
protection of certain industries like food, be verages, tobacco, textile and leather.  
47. An issue that is of considerable importance for Nepal's competition in global markets is the 
issue of standards. Nepal's infrastructure for st andardization and conformity assessment could be 
strengthened further. The country does not have an accreditation system and sufficient testing 
facilities. This resulted in export restrictions. Are there any technical assistance measures or 
cooperation projects with trading partners to  support Nepal's efforts in this regard? 
48. An important issue for economic growth, especially  for a remote country like Nepal, is trade 
in services. Accordingly, the services sector contri butes about 50% to real GDP while it employs only 
15% of the labour force. This clearly shows that services have already become a key sector to the 
economy. Nepal's extensive commitments under th e GATS - including on financial services, 
telecommunications, transport, tourism and profession al services – shows, that the government is well 
aware of this fact and that it highly values this sector.  
49. For example, Nepal is a preferred destination for many tourists from all over the world. The 
tourism sector also is adversely affected by struct ural challenges such as weak infrastructure, shortage 
of good-quality accommodation and sk illed personnel. With the aim of tackling these problems, the 
authorities launched several policy proposals and ac tion plans. Foreign investment in the tourism 
sector faces wide-ranging limitations. 
50. Nevertheless, Nepal is a net importer of services.  This is a clear signal that there is still 
significant scope for improvement. Areas like tour ism or information and communication technology 
offer many economic opportunities that should be take n. To meet the challenges Nepal has tried to 
tackle the structural problems the sector is facing. In this context it would be interesting to learn 
whether Nepal intends to undertake further steps of liberalization with the aim of improving the 
competitiveness of the service sector. I would like to conclude by wishing Nepal that it may achieve 
the goal of sustainable growth of its economy while preserving the extraordinary beauty of its country.  WT/TPR/M/257 
Page 12  
 
  IV. STATEMENTS BY MEMBERS 
UNITED STATES 
 
51. The United States recognizes that acceding to the WTO can pose particular challenges for 
LDCs and remains committed to working closely with LDCs, as it did with Nepal, to maximize the 
benefits of the WTO accession process for a country's economy.  As the first LDC to go through the 
full WTO accession process and complete it, Nepal met those challenges head-on and used the results 
of the negotiations to enhance its investment clim ate.  The obligations undertaken by Nepal in its 
accession package reflected its desire  to establish greater predictability and openness in its market 
through its commitments to WTO Members.  This includes binding virtually all of its tariff lines; 
expanding market access for imports, including for agricultural products; and scheduling meaningful 
services commitments, including in financial servi ces, telecommunications, and professional services 
that make it clear that Nepal welcomes foreign ser vice suppliers that can help improve its business 
infrastructure. 
52. Nepal undertook these market access obligati ons to promote economic development by 
ensuring the availability and greater affordabilit y of goods and services needed by the Nepalese 
people.  These obligations and other economic refo rms have contributed to the diversification of 
Nepal's exports and its steady economic growth in th e past several years.  For example, recognizing 
the economic benefits of opening trade in telecom services, Nepal made several specific commitments 
on telecommunications, including signing the Re ference Paper on basic telecommunications. 
These commitments, along with generally positive legi slative initiatives, appear to have contributed 
to impressive results for Nepalese consumers. As the Secretariat highlighted, Nepal's 
telecommunications network has grown considerably over the last few years, with considerable 
increases in cell phone subscribers a nd Internet users since accession. 
53. The United States has a long history of economic  engagement with Nepal, and we were 
particularly pleased to be able to advance that engagement by signing a Trade and Investment 
Framework Agreement with Nepal in 2011.  This  Agreement establishes an ongoing mechanism for 
us to discuss trade and investment issues of mutual interest in order to furt her strengthen the bilateral 
economic relationship. 
54. Nepal's accession protocol outlined a number of st eps Nepal would need to take in subsequent 
years to bring its trade and investment regime more in line with WTO rules.  Nepal has made 
significant progress on these steps, including the use of valuation methods prescribed by the Customs 
Valuation Agreement, the adoption of laws designe d to base SPS measures on international standards, 
and the preparation of standards legislation with a view to implementing the TBT Agreement.   The United States commends Nepal on this concrete dem onstration of its commitment to the rules-based 
system of the WTO. 
55. Equally important, however, Nepal has not simply  been content with trying to implement 
WTO rules.  Instead, Nepal has engaged in a serious examination of trade and investment policy tools, 
including through its Nepal Trade Integration Study  (NTIS), in order to determine how those tools 
could best contribute to the country's economic development goals.  In so doing, Nepal has 
emphasized the central role played by the private sec tor rather than the State in economic growth, and 
has accordingly pursued liberalizing policies that are designed to create greater opportunities for the 
private sector.  Additionally, the United States would like to highlight, in par ticular, the actions taken 
by Nepal to streamline customs procedures and a dopt other trade facilitation measures, which have 
already led to a reduction in documentary requireme nts.  We also acknowledge the work Nepal is 
doing to further automate its customs procedures, with the aim of facilitating investment in Nepal.  WT/TPR/M/257 
 Page 13 
 
 
  56. That Nepal has taken such positive steps in th e face of serious difficulties – as a landlocked 
country, struggling with armed conflict, and est ablishing new governmental institutions – is a 
testament to the determination and resolve of Nepal.   We encourage Nepal to continue to make the 
most of trade and investment policy tools, enshri ned in the multilateral framework of the WTO, to 
help improve the lives of its people.  We also encourage Nepal to continue working with the 
Secretariat to meet its notification obligations. 
57. We appreciate that Nepal has expressed its commi tment to working through the challenges it 
continues to face in developing a high standard tr ade and investment regime.  Whether in regards to 
public procurement practices, the investment climat e, GSP, standards and conformity assessment, or 
IPR protection and enforcement – or, indeed, any other area of trade and investment policy – the 
United States stands ready and committed to work with Nepal, bilaterally and with other Members 
through the WTO, to address those challenges. 
58. In closing, the United States appreciates this op portunity to participate in this discussion and 
looks forward to exploring Nepal's trade and inv estment regime with the delegation from Nepal and 
other Members.  We look forward to continuing ou r work with Nepal and our trading partners to 
strengthen the global economy and th e multilateral trading system embodied by the WTO, allowing 
trade and investment opportunities to expand.   
AUSTRALIA 
59. Australia welcomes the opportunity to participate in this TPR of Nepal.  We share close ties 
with Nepal and look forward to a detailed discussi on on addressing its trade policy challenges.  Both 
the Government and the Secretariat reports highlig ht the trade and economic policy challenges facing 
Nepal.  Clearly, a great deal of progress has been made since Nepal began its process of unilateral 
economic liberalisation in the early 1990s and joined  the WTO in April 2004.  We congratulate Nepal 
on the measures it has taken to implement its WTO accession commitments. 
60. We welcome the frank assessment by Nepal of th e challenges that it continues to face in 
harnessing trade for development.  Challenges id entified in its TPR Report include the overall 
governance environment, trade-related infrastructure,  greater cooperation with the private sector in 
formulating trade policy, and complia nce with SPS and other standards. 
61. The 2010 Nepal Trade Integration Strategy a nd 2009 Trade Policy are positive steps towards 
addressing some of these challenges.  As a donor to the Enhanced Integrated Framework, and as a key 
bilateral development partner for Nepal, Australia lo oks forward to further engagement with Nepal as 
it implements these policies. 
62. It is clear that there is more work to be done before LDCs like Nepal can harness fully the 
potential for growth and poverty reduction created through integration into the global economy.  
Australia is a strong supporter of any measures that  we can take here in the WTO to help LDCs 
achieve their development objectives through partic ipation in the multilateral trading system.  
Australia extends full duty-free quota-free access to LD Cs on 100% of tariff lines for their exports to 
the Australian market.  We are also working activel y in negotiations to streamline the LDC accessions 
process, so that all LDCs can benefit from the ope n, rules-based multilateral trading system.  This 
TPR allows us to consider ways WTO Members ca n work with Nepal and other LDCs to meet these 
challenges.   
JAPAN 
63. Let me start with Nepal's macr oeconomic environment. Its real  GDP growth was a moderate 
4.2% per annum during 2004-11; and th is is not such an impressive figure, given its status as a least WT/TPR/M/257 
Page 14  
 
  developed country. The Governme nt Report recognises and the Secretariat's Report points out and 
that one of the factors impeding higher GDP growth is political instability. Japan  sincerely hopes that 
Nepal will successfully integrate th e ex-Maoist soldiers into the national army and adopt a new 
constitution soon. Other factors include energy s hortages and poor infrastructure. These are also 
without a doubt urgent issues for development, a nd are being addressed by the government of Nepal. 
Japan encourages Nepal to continue its efforts. Japan continues to be available to assist its efforts.  
64. Similarly to the GDP, Nepal's FDI inflows have  been low even among other least developed 
countries. Japan welcomes the Nepalese government 's initiatives to promote FDI, including the 
establishment of a Board of Investment and a planned single-window service for investors. The 
promotion of FDI is essential for the sustaina ble development of the GDP, the creation of job 
opportunities and the introduction of the latest technol ogies. At the same time, we also note that there 
remain a variety of restrictions in this regard  and encourage Nepal to take further steps.  
65. Regarding trade and trade-related policies we  have two comments.  Firstly, there is a 
substantial presence of state-owned enterprises in  Nepal's economy. They account for 11.2% of the 
GDP in 2009/10. However, according to the Secretar iat's Report, these are not serving their objective 
well, and more than one third of them are seei ng losses. It further tells us that although the 
government intends to privatize all of them, so me unsuccessful privatizations have made the 
government hold off on further privatization. Japan encourages Nepal to resume measures to improve 
their efficiency both in terms of its policy obj ectives and economy through well designed privatization 
and/or other means.  
66. Secondly, public procurement is also an importa nt part of the economy, given that it accounts 
for 13 to 15% of its GDP. The Nepal government ri ghtly introduced new procurement legislation to 
make public procurement transparent. However, th e Secretariat's Report shows that the government 
recognises its insufficient implementation. Japan hopes that Nepal will address issues recognised 
within its own report, such as an unclear procur ement process and method, insufficient monitoring, 
and overall compliance issues with publ ic procurement legislation.  
67. In conclusion, Japan would like to reiterate its hope  that Nepal will further facilitate trade and 
investment through development in infrastructure and liberalization, and will improve its economic 
efficiency. 
EUROPEAN UNION 
68. The European Union is one of Nepal's main partners in trade and also in development 
cooperation. Our two-way trade amounted to €167 m illion in 2010. As a LDC, Nepal benefits from 
the EU's "Everything but Arms" preferential sch eme, which provides duty-free-quota-free market 
access for all goods except arms. In addition, the EU has new and relaxed preferential rules of GSP 
rules of origin in force since the beginning of 2011, which contain special provisions for LDCs. These rules allow LDCs to claim origin for many more  goods processed in their territories and thus 
contribute to more stable and predictable trading environment. 
69. We are also the biggest provider of development assistance to Nepal, supporting Nepal's main 
development objectives, i.e. to create a solid de mocratic system of good governance and enhance its 
sustainable economic development. Therefore, e ducation, peace and stability, trade facilitation and 
economic capacity building are the core areas of our cooperation. The multi-annual indicative 
programme allocates €120 million to these three areas.  On top of this amount, about €60 million is 
also provided by the EU to Nepal from various  thematic and regional funding sources.  
70. According to the reports presented to this mee ting, Nepal's average annual GDP growth since 
acceding to the WTO until 2011 has been around 4% .  Trade accounts for about 40% of Nepal's GDP,  WT/TPR/M/257 
 Page 15 
 
 
  and its average tariff of 12% puts Nepal among Sout h Asia's most open economies. However, despite 
these figures, it is also one of the region's poorest countries, highly dependent on remittances. Its political uncertainties and supply-side constraints re main the main factors impeding higher rates of 
GDP growth. We positively note that Nepal has take n several steps to addr ess these challenges in 
recent policies. Its new trade policy, introduced in  April 2009, recognises the need for the coherent 
socio-economic policies and the effective role of tr ade to achieve country's sustainable and inclusive 
development. It emphasises the diversification of its  export basket and modernisation of its traditional 
agrarian economy. 
71. Nepal's institutional and legislative reform e fforts in areas such as customs, investment, 
competition, protection of intellectual property rights  are worth to be highlighted. We encourage it to 
continue its ongoing efforts and call on Nepal to fu rther open up its services market to attract foreign 
investment and improve its economic infrastructure. 
72. Let me use the opportunity to make comments on those areas where we think improvements 
would enhance Nepal's development and contribute to  its integration to the world economy. First, the 
EU would like to encourage Nepal to redouble its  efforts to pursue ongoing reforms, including 
implementation of legislation.  In this context,  I would like to raise Nepal's Law on Government 
Procurement, implementation of which and mon itoring of practices remains a concern. Several 
problems have lead to poor compliance with the public procurement legislation and unfair 
competition. We therefore encour age Nepal to work on this. 
73. My second comment relates to Nepal' export tax es, in particular on wood products. In this 
regard, we completely agree with WTO Secretariat' s report assessment that such export restraints may 
not be the best way to achieve some of Nepal' s objectives. Export taxes on wood tend to discourage 
the export and encourage illegal wood exports. If the ai m of this tax is to protect environment, the 
export tax is not considered an e ffective measure. We would urge Ne pal to examine other measures to 
address this in order to find a more sustainable solution. 
74. Last but not least, one of the current major shortcomings preventing Nepal from access to 
global markets is the poor standardisation and conf ormity assessment infrastructure. Nepal lacks an 
accreditation system and sufficient testing facilities.  We appreciate Nepal's efforts in adopting the 
code of good practice for the preparation, adopti on and application of standards in accordance with 
the WTO agreement on Technical Barriers to Trade.   We would like to encourage Nepal to adopt 
more international standards as national standards,  if possible, in order to facilitate and support 
international trade, and to urgently ratify the Nepa l Standards Act and the Accreditation Board Act.   
75. In conclusion, let me state that since join ing the WTO Nepal was the first LDC to accede 
WTO through the full Working Party accession process and has without doubt made important strides 
towards becoming a relatively open and liberalized economy based on multilateral principles. Nepal is 
illustrating that acceding to th e WTO can be extremely benefi cial for the LDCs' economic 
development, and we encourage Ne pal to continue its efforts.  
CHINA 
76. Nepal is a good neighbour of China. The friends hip between China and Nepal dated back to 
as early as centuries ago. In the 7
th century, both countries started to dispatch envoys to visit each 
other. In the 13th century, the talented Nepalese artisan An igo helped build Buddhist towers in both 
Lhasa and Beijing of China, which are still kept int act and have since witnessed the continuation of 
our friendship. 
77. Today, the economic and trade cooperation brings us even closer. In 2011, China became the 
second largest trading partner of Nepal. Bilatera l trade reached US$1.2 billion, up 61% over the WT/TPR/M/257 
Page 16  
 
  previous year. China has also incr eased direct investment in Nepal over the years. By the end of 2011, 
the accumulative direct investment of China in Nepal had amounted to US$18.6 million. As the Secretariat Report noted, China has also provide d Nepal development aid under the framework of 
south-south cooperation. 
78. Nepal is the first LDC to join the WTO since the establishment of this Organization. We are 
glad to see that the accession in 2004 has brou ght Nepal tangible achievements of its economic 
development. For instance, between  fiscal year 2003 to 2010, annual real GDP growth averaged 4.2% 
and per capita GDP more than doubled. This has not come easily. Long before its accession, Nepal 
had already embarked on structural reforms and tr ade liberalization. Since its accession, much more 
progress has been made in various areas especially in  trade facilitation. Its average applied MFN tariff 
has decreased and the law-making and enforcement e fforts strengthened. We believe that, with the 
implementation of the Nepal Trade Integration St rategy 2010 in full swing, the Nepalese economy 
performance will result in even stronger development. As noted by the Secretariat Report, Nepal also 
participates actively in the Informal LDC Consu ltative Group in the WTO, calling for "duty-free, 
quota-free" and other preferential treatment for LDCs. Therefore, China commends Nepal for its 
efforts in mainstreaming trade into its development st rategy and also for its active participation in the 
multilateral trading system. 
79. Having said that, we bear in mind that Nepal remains one of the poorest countries in South 
Asia with enormous challenges, particularly supp ly-side constraints such as limited export basket, 
inadequate economic infrastructure and insufficient skilled human resources.  On this, WTO aid-for-
trade initiative can play a constructive role to he lp Nepal overcome these challenges. As noted by 
OECD, a marked gap exists between aid-for-trade commitments and disbursements in Nepal. Nepal 
also assesses that, so far, aid-for-t rade has shown only limited contri bution to its economic growth and 
poverty alleviation. Thus, we would like to call upon the international community to provide more 
contribution to assist Nepal and other LDCS. Some areas where such contribution could come from 
include aid-for-trade and duty-free and quota-free.  China will continue to participate in such 
endeavour both multilate rally and bilaterally. 
PAKISTAN 
80. Pakistan and Nepal have strong bilateral, regional and multilatera l ties. Bilateral trade balance 
is in favour of Nepal. We have strong links through the South Asian Association of Regional 
Cooperation; this cooperation covers a wide spect rum of economic developm ent through cooperation 
and integration. The areas of cooperation ra nge from food security to conformity assessment, 
investment, banking, infrastructure development, human resource developm ent and growth through 
regional trade development. 
81. Nepal became a WTO Member in 2004, since its  accession its volume of trade has doubled. 
The country is engaged in a transformation pro cess emphasizing the importance of trade in services 
and industrial sectors. Although the transformation path  is not easy, the contribution of the services 
sector has increased over the years. It has reached  50.1% of GDP in 2010/11 as compare to 45.9% in 
2004/05. The shares of agriculture and industry in GDP have been decreasing. Traditionally Nepal is 
an agrarian country and only 18% of the popula tion is employed in the services sector. Agriculture 
contributes 34.9% to the GDP and more than 73% of total employment. 
82. Remittance and tourism are the two major sources of income. Nepal has also created a niche 
market in medical analysis and reporting to meet th e increasing needs of the glob al health industry. It 
is presently a small market but the prospects are enormous. The Government has taken few steps 
including formulation of policies, enactment of the electronic transactions act, establishing information Technology Park and promoting hu man resources in information and communication  WT/TPR/M/257 
 Page 17 
 
 
  technology. Nepal's ability to get even a small shar e of the world market will go a long way towards 
fastening the pace of economic development. 
83. The Government has also taken measures for trade facilitation, customs department has 
initiated reform program on automa tion and is planning to provide web based clearance system. It is 
moving forward to put in place the national singl e window which will help in streamlining trade 
procedures and will also reduce transaction costs for doing business across the border. 
84. Nepal is eager to attract investment and their new investment policy the Board of Investment 
Act 2011 provides legal provision that there will be  no nationalization of private industries. The 
Government has declared fiscal year 2012/13 as the na tional investment year. In the next review it 
would be interesting to see the impact of their industrial and investment policy. Some of the 
constraints faced by Nepal are long political transitio n, difficult terrain, geographical location, limited 
export basket, inadequate economic infrastructure, in adequate market information, insufficient skilled 
human resources, etc.  Nepal has come up with  sound policies to make a turnaround; the donor 
community can help them to execu te those policies through effective use of trade related assistance 
under aid for trade and EIF initiatives. 
PARAGUAY 
85. There are many points of interest for WTO Members in both the Report by Nepal and the 
Report by the Secretariat.  The first review of a Me mber is always interesting.  The Report by Nepal 
highlights various bills relating to its trade polic y planning, ranging from the Constitution to reforms 
in specific sectors such as agri culture, intellectual property, a nd hydroelectricity resources. 
86. The delegation of Paraguay was also particularly  interested in the problems facing Nepal as a 
landlocked country, in particular transit restri ctions and the introduction of the single window.  
We urge the Government of Nepal to pursue these reforms and will be ready to support them when it 
comes to trade facilitation and transit. 
87. The Report by the Secretariat describes the progress made by Nepal in the trade policy area 
since its accession to the WTO in April 2004 as the fi rst of the least developed countries to become a 
Member of the WTO.  We also appreciate the information on the problems facing Nepal as a 
landlocked country and the efforts it has made to overcome this handicap.  Another point of interest in 
the Report by the Secretariat is private sector part icipation in trade policy planning.  We see this 
initiative as responding to the specific needs of Nepal when it comes to planning and implementing its 
trade policies. 
88. This first Trade Policy Review of Nepal will enable its authorities to assess the progress made 
and the challenges it has faced since its accessi on to the WTO.  We are certain that the 
recommendations and the results of this review will help Nepal to pursue its efforts and become more 
involved in the multilateral trading system. 
ARGENTINA 
 89. Economic and trade relations between Argentina a nd Nepal are growing.  In fact, according to 
data for 2011, Argentina is Nepal's main trading pa rtner in South America.  At the same time, it 
should be pointed out that Nepal, the first LDC to  join the WTO, has achieved remarkable progress, 
as exemplified by its economic growth between 2004 a nd 2011, or the reform of its tax system, which 
enabled it to considerably increase its revenue from customs duties and TVA, thus reducing the public 
debt/GDP ratio. WT/TPR/M/257 
Page 18  
 
  90. When it comes to trade, transaction costs are high, and 99.3% of tariff lines are ad valorem .  
It should be noted that the average applied ta riff fell to 12.2% in 2011/2012 and that Nepal is 
launching a reform programme aimed at setting up a single customs window. 
91. We appreciate this opportunity to exchange information and ideas concerning Nepal's trade 
policy, and in conclusion, I would like to stress the importance of this exercise in transparency from 
every point of view and to wish the authorities of Nepal every success in overcoming the challenges 
facing their country and opening the way to full development. 
THAILAND 
92. Nepal and Thailand have had a diplomatic and economic relati onship for more than five 
decades.  During the years 2008-2011, the total trad e value between Nepal and Thailand averaged at 
US$66.96 million per year.  In 2011, our total trade value with Nepal was at US$65.74 million, 
slightly dropped from 2010.  Thailand is a net expor ter to Nepal of approxi mately US$66 million per 
year.  
93. Our main exports to Nepal include synthetic  staple fibers, essential oils, perfumes and 
cosmetics, machinery and parts, apparel and clot hing, spices and medicinal plants, and chemical 
products.  Thailand's imports from Nepal cover machinery and parts,  textile products, and electrical 
machinery.  We hope that our trade relationship will continue to prospe r as Thailand and Nepal 
become more economically integrated through not only the multilateral regime of the WTO but also 
the regional cooperation of the Bay of Bengal Initia tive for Multi-Sectoral Technical and Economic 
Cooperation or BIMSTEC.  
94. Thailand commends Nepal's WTO commitments on goods with 99.4% of its tariff lines bound 
and its extensive commitments on services.  We also  recognize Nepal's active participation in the 
world trade system through two regional agreements a nd 17 bilateral trade agreem ents.  Nepal's effort 
to enhance trade is also shown through customs pro cedures simplification, elimination of a number of 
other duties and charges on imports, and its implemen tation of the Trade Integration Strategy, aiming 
at efficiently and effectively enhancing trade-rela ted technical assistance and aid for trade and at 
promoting 19 priority export potential activities. 
95. However, we believe that there are areas whic h Nepal still has room to improve, including her 
lack of diversity of her exports, her heavy relia nce on remittances from abro ad, and high cost for 
doing business and investment.  Thailand would like to  encourage and show our strong support to the 
Nepalese government's effort in continuing work on these issues. 
96. Besides trade, Thailand and Nepal have cooperation in the areas of  religion, history, cultures, 
and academics.  Among such cooperation, Thailand  has provided scholarships to the Nepalese to 
study or receive training under a number of projects, which include, inter alia , the Annual 
International Training Courses and Technical Cooperation among Developing Countries (TCDC).  
TURKEY 
97. This first review will help us  understand the environment where Nepal's trade and investment 
policy choices have been made since its accession in 2004.  We noted that following its accession, 
Nepal has continued to reform and modernize its  economy despite many challenges and the recent 
economic crisis. Since then, Nepal has recorded signi ficant progress on several fronts. For instance, it 
achieved steady and stable economic growth rate of  4.2% in the review period. Furthermore, while 
many countries have faced problems of high levels of public debt, it has succeeded in reducing almost 
by half its ratio of public debt to the GDP by improving tax collection.    WT/TPR/M/257 
 Page 19 
 
 
  98. Similarly, it is commendable that Nepal eliminated a number of other duties, simplified 
customs procedures and took measures to further ease trade flows. Nepal's adoption of the competition law is also a remarkable step, given its status as a least developed country.  
99. Nepal faces many structural problems like na rrow export base, difficulties in reaching to 
export markets, lack of testing facilities, insufficient energy resources, increase in trade deficit, Nepal 
has maintained an open and liberal trade regime wi th almost fully bound tariff lines, low levels of 
tariffs and extensive commitments in more than 70 services sectors.  
100. Nepal's decision in 2010 to allow foreign banks to operate in wholesale market is a reflection 
of its commitment to further liberalization in servi ces. This is a very welcome course for trade policy 
making. In fact, we very much appreciate that Nepal has been seeking to improve its economy and 
reform the markets by maintaining its open trade regime through strategies like the 2009 Trade Policy 
and Trade Integration Strategy. We hope that such  strategies will also contain measures which will 
further encourage foreign investment. Such efforts may be further complemented by steps to improve 
the business environment. 
101. We understand the challenge Nepal has faced as a landlocked country in reaching to its export 
markets. That is why, at the trade facilitation negotiations, we support the initiatives on transit, 
including the ones from Nepal. We also share Nepal's concern with regard to food security and we are 
ready to work with them to address this issue among others. 
102. We are looking at ways to further improve our b ilateral trade relations with Nepal. Our trade 
is around US$24 million. Nepal is benefitting from dut y free access to the Turkish market under the 
GSP program. On the occasion of the Fourth UN Conference on LDCs in Istanbul, Nepal's Prime 
Minister visited Turkey and met with our President. Currently, we are looking at the possibilities of 
providing technical and development aid to Ne pal as well as assessing bilateral cooperation in 
agriculture and tourism.  
INDIA 
103. We are encouraged by the large number of reforms implemented by Nepal to promote trade 
and investment and meet its growth targets. We ar e happy to note that Nepal experienced an average 
GDP growth rate of 4.2% during 2004-11 despite external and domestic difficulties. Its per capita 
GDP increased from US$293 to US$642 over the same period.  
104. Agriculture remains an important sector for Nepal, contributing to employment and income 
generation, providing raw materials for industry an d ensuring food security. In this context, we 
welcome the Government's emphasis on agricultu ral development by introducing a long-term 
Agriculture Perspective Plan and formulating th e Agriculture Development Strategy, aimed at 
enhancing production and productivity.  
105. Simultaneously, Nepal is also making efforts to diversify its economy by encouraging the 
services and industrial sectors. As a result, the contribution of the services sector has gradually increased over the years and now constitutes 50% of its GDP. We note with appreciation, the 
importance accorded by Nepal to industrial de velopment and the adoption of business friendly 
policies, including the new Industrial Policy of 2010, aimed at promoting private sector participation 
and attracting foreign investment. 
106. Trade forms an important component of Nepal's economy contributing 41% of GDP. 
However, the share of exports in total trade h as decreased to 14% while share of imports has 
increased to 86% since 2004. We congratulate the Gove rnment of Nepal for taking the necessary steps 
to promote and diversify its trade with a view to correcting the imbalances, through a new Trade WT/TPR/M/257 
Page 20  
 
  Policy released in 2009, and to mainstream trade into its development plans and programmes through 
the Nepal Trade Integration Strategy (NTIS) of 2010. Nepal's relatively simple tariff structure and 
trade facilitation measures such as automated web based clearance system are laudable and should 
assist Nepal in its trade promotion objectives.   
107. As Nepal's largest trading partner, India shares  a special relationship with Nepal, deep-rooted 
in history, and nurtured by years of cooperation in di verse fields. The high importance attached to this 
relationship is reflected in the growing linkages in trade and commerce, both in the bilateral and 
regional framework. The India-Nepal Trade Treaty,  concluded in 1996 and revised in 2009, has 
served as a useful instrument for promoting bilate ral trade by providing preferential market access. As 
a result, India now accounts for over 60% of Nepal's merchandize trade, and one third of its trade in 
services.  
108. As per Indian data, total trade between th e two countries amounted to US$2.717 billion in 
2010-11, reflecting a growth of 36.85% from a bilateral trade figure of US$1.985 billion in 2009-10. Exports from India to Nepal grew by 43.7% during 2010-11 to reach US$2.204 billion, while India's imports from Nepal increased by 13.4% to reach US$513.4 million in 2010-11 . India and Nepal are 
members of two regional FTAs, namely SAFTA and BIMSTEC, and share extensive cooperation 
under this framework.   
109. Being a landlocked country, India provides transit for almost the entire third country trade of 
Nepal. India and Nepal have a treaty of transit which confers transit rights through each other's 
territory through mutually agreed routes. India offe rs 15 transit routes from Kolkata to Nepal for its 
third country trade.  The majority of bilateral trade is conducted through six major land ports or 
customs checkpoints along the border. The two gover nments are working together to streamline the 
movement of goods by setting up necessary infrast ructure for clearance and testing facilities.  
110. As the largest source of investment, India acc ounts for about 47.5% of total approved FDI in 
Nepal, with Indian investment commitments  amounting to Nepalese rupees 32.3 billion. 
Approximately 150 Indian ventures are operating in Nepa l in the areas of manufacturing, power sector 
and services such as banking, insurance, dry ports, education, tourism and telecom, providing direct 
employment to over 30,000 people, and contributing significantly in terms of revenue and exports of 
Nepal. 
111. In recent years, hydro-power has emerged as an  attractive sector for Indian investment. 
Several Indian companies have obtained survey lic enses for hydro-power projects in Nepal. Located 
in the Himalayan region, Nepal is blessed with a bundant water resources and is estimated to have a 
hydropower capacity much beyond its foreseeable domestic requirement, presenting an enormous 
opportunity for regional trade. We welcome Nepa l's efforts to pursue development of its hydro 
resources by encouraging private sector par ticipation and foreign investment. Successful 
implementation of hydropower projects can help Nepa l to address not only its current power shortages 
but also enable it to export electricity.   
112. To assist Nepal in infrastructure developmen t and capacity building, India has extended a 
concessional line of credit of US$100 million in 2006 which is being used for road construction, 
hydro power projects, and rural electrification.  In 2011, another line of credit of US$250 million was 
extended. India is providing extensive assistance to develop Nepal's trade related infrastructure 
including through construction of integrated check  posts, construction of roads and highways, and 
setting up cross border rail links. Training for skill  development is being provided under the ITEC 
programme with 200 training slots per year.   
113. We recognize the immense socio-economic ch allenges confronting Nepal and commend the 
steps taken to address these. Nepal has identified several areas where aid for trade can play an  WT/TPR/M/257 
 Page 21 
 
 
  important role in terms of infrastructure developm ent, trade promotion and capacity building. India 
remains a willing partner to join Nepal in its pl ans for economic and social development and looks 
forward to working with Nepal to exploit the full potential of our bilateral trade and economic 
relationship. 
CAMBODIA 
114. Cambodia notes with high appreciation of the important progress in many areas of its trade 
policy that Nepal has made since it a cceded to the WTO in 2004. Nepal has, inter alia , streamlined its 
tariff structures in which almost 80% of tariff lines ar e with the rates of 5, 10 and 15%, reduction of 
non-tariff tax, limiting number of products subjected to import licensing, adoption of new customs act 
to implement the agreement on customs valuation. Nepal has also put its great efforts towards the 
implementation of a single window. My delegation believes that these  reforms will facilitate trade 
tremendously for the benefit of Nepal and the WTO Members. 
115. Cambodia also notes with concern the Report of the Government on para graph 2 of page 12, 
which states that "after the accession of Nepal to th e WTO, the share of export in total decreased from 
28.2% in 2004/05 to 14.5% in 2010/2011 in comparison to the increase in import from 71.8% to 
85.9% during the same period". In this connection,  my delegation wishes to know what are specific 
measures that has Nepal introduced or will introduce to  tackle this trade deficit in a short and longer 
term. 
SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU 
116. As this is Nepal's first Trade Policy Review, it is  a unique opportunity for us to gain a better 
understanding of its economic polic ies and development, as well as the challenges that Nepal can 
expect to face in the years to come. Following its  recent transition from decades of severe political 
instability, and despite the dramatic downturn in th e global economy triggered by  the financial crisis, 
Nepal's real annual GDP growth si nce its accession to the WTO in 2004 has averaged +4.2%. At the 
same time, however, about 25% of the population still lives below the poverty line. On its accession 
to the WTO, Nepal bound 99.4% of its tariff lines and made extensive comm itments under the GATS, 
thus demonstrating its firm intention to become  integrated into the multilateral trading system. 
117. We welcome its new Trade Policy 2009 and the Nepal Trade Integration Strategy 2010, with 
plans for further reforms to its economic and lega l framework aimed at accelerating economic growth 
and reducing poverty. It does seem, however, that further improvement is required particularly in 
areas such as customs, taxes, trade facilitation, SPS,  TBT and investment, if further growth is to be 
sustained.  Also, Nepal being a country known for its rich cultural, social, ethnic and geographical 
diversity, and its natural beauty, more infrastruct ure improvements would surely benefit the tourism 
sector and might be a good way of making use of such natural advantages.  
118. As an STDF donor ourselves, my government is pleased to see that several projects granted 
by STDF have helped to further strengthen Nepa l's SPS capacity since 2006. We believe that these 
capacity-building and training projects enable Nepal to better implement the SPS Agreement and 
create greater opportunities for exporting agricultural products, with less difficulties for its trading 
partners. 
119. Bilaterally, the total value of two-way trade between us in 2011 amounted to just 
US$9.8 million. Though small at present, this serves to highlight the potential for expanding the flow 
of trade between us in the future. If we can each  identify our particular needs and concentrate on 
specific complementary trading sectors, I am sure we  can turn that trade potential into reality.  In 
conclusion, we welcome Nepal's cont inuing reforms and investment in infrastructure with a view to 
improving the business environmen t and enhancing productivity.  WT/TPR/M/257 
Page 22  
 
  HAITI 
120. Haiti on behalf of the LDCs on the WTO gives its  support to the delegation of Nepal at their 
first TPR.  Nepal following a long and difficult accesion process to the WTO concluding on 2004, has 
been an exemplary and responsible WTO Member .  Following a large number of sacrifices and 
efforts, Nepal has gained the confidence of its part ners in its determined search for well being and 
prosperity for its people, and we are proud to we lcome the delegation of Nepal to this Review 
renewing the support of the Consultative Group of LDCs of the WTO wishing them a successful 
Review and a positive outcome of this first TPR at the WTO. 
NIGERIA 
121. At the outset, Nigeria would like to commend Ne pal for its liberalisation efforts since 1992 
and for being the first least deve loped country, to join the WTO th rough the full accession process in 
April, 2004, which is a milestone and a feat th at was acknowledged by the WTO Secretariat in its 
report. Nepal's active participation in the DDA negotiations, including its contributions in the 
activities of the LDC's Group is commendable. We however note the challenges facing Nepal as one 
of the poorest countries in South Asia with about 25% of her population living below the poverty line. 
As pointed out in the Secretariat Report, lack of diversity of its exports and heavy reliance on 
remittances from abroad (over 20% of GDP) are responsible for the economy's vulnerability to 
external shocks. 
122. According to the survey of business sector, gove rnment instability has been identified as the 
most problematic factor of doing business in Ne pal. It is followed by inefficient government 
bureaucracy, policy instability, inadequate supply of  infrastructure and labour restrictive regulations, 
among others. Nepal still has a long way to go in  order to become an efficiency-driven and 
innovative-driven economy.  
123. The fact that Nepal attracts limited FDI inflows as a result of the high cost of doing business 
and limited investment opportunities, makes it co mpelling for support to the government in its 
economic policy programme, geared towards the pr omotion of a transparent and friendly business 
environment for both domestic and foreign invest ment, including the encouragement to enhance the 
role of the private sector in the developmen t process. However, poor reliability and access to 
electricity are the most serious infrastructur e bottlenecks to growth. While increasing access to 
electricity in a timely and cost-effective manner remains one of the most significant development challenges facing Nepal today. Despite Nepal having one of the largest untapped hydropower 
resources in the world, efforts to improve el ectricity situation have been unsuccessful.  
124. Furthermore, Nepal's economic growth continu es to be adversely affected by the political 
uncertainty. The protracted insurgency has adversely affected development efforts, while the country's 
infrastructure is insufficient to meet steadily growing demand. As  acknowledged in the Government 
report, the transformation process of the economy fr om predominantly agricultural sector to services 
and industrial sectors is yet to be fully accomplishe d. In spite of these challenges, Nepal maintained a 
policy of prudent fiscal management which should be sustained.  
125. The importance of agriculture to the economy cannot be over emphasised.  It contributes 
around 34.9% of total national GDP and more than 73% of total employment. Given that productive 
agriculture is a crucial element of inclusive growth, enhancing the efficiency of irrigation systems will 
continue to be critical in order to increase ag ricultural productivity, incomes and rural livelihoods. 
Therefore, the Government should be supported in the implementation of its Agriculture Development 
Strategy (ADS), including assistance in a ddressing the inefficiencies in the sector.   WT/TPR/M/257 
 Page 23 
 
 
  126. As acknowledged in the Government Report,  the present performance of Nepalese economy 
and trade is affected by weak infrastructure, in pa rticular, lack of energy and road infrastructure. 
Nepal is presently facing severe energy crisis. Ther e is also the shortage of high quality professionals 
in all sectors. Therefore, we call on all Members to assist the Government to overcome several challenges facing Nepal, particularly addressing th e several obstacles militating against growth. While 
the Government is striving to implement its comm itments and accelerate legal reform in compliance 
with WTO provisions, we support the call by the Gove rnment of Nepal for de velopment partners and 
Members to continue and scale support in this trying period as it embarks on the journey of socio-economic transformation. Nepal being a landlocked country, the negotiations on trade 
facilitation is of crucial importance for securing tr ansit sufficient transit rights. Furthermore, 
implementation of trade facilitation measures will also help in enhancing the competitiveness of 
Nepalese enterprises.  
127. Nigeria enjoys excellent relations with Nepa l and would continue to support its efforts 
towards creating new trading opportunities as well as its integration into the global economy. Nigeria wishes to call on members, to provide Nepal with ade quate technical and financial assistance,  that are 
required to implement its ongoing refo rms to facilitate the attainment of the Millennium Development 
Goals within the United Nation's target date of 201 5. Adequate resources should also be mobilised to 
support the Government of Nepal's overarching goal  to build a peaceful and prosperous country.  
After years of conflict and instability, there is th e need for continued support for growth, sustainable 
livelihoods and poverty reduction, so as to sustai n the modest economic growth achieved in recent 
years. 
SRI LANKA 
128. Let me begin with reflecting on the historical relations between Nepal and Sri Lanka attached 
to cultural, social and political spheres.  The st rong relationship between the two countries has grown 
strength to strength more than the relationshi p we share as partners in SAFTA and BIMSTEC. 
129. With regard to trade policy, my delegation ta kes note that the nominal per capita GDP and the 
total trade has doubled at the end of the period under review, which we consider  very positive in spite 
of the turbulent period Nepal had gone through.  However, a decrease in the export share, more 
reliance on imports and not achieving the desired out come of the economic policies implemented, is 
understood as a matter of concern to a small economy like Nepal. 
130. On the other hand, we understand that there are other potential areas where Nepal a country 
rich with natural resources could concentrate in developing its economy and alleviating poverty and 
improving the standard of living of the people.  IC T, hydro power, education and health and tourism 
are some areas that can be identified, wh ich could be developed with FDI policies. 
131. My delegation commends the efforts taken by the Government of Nepal to ensure the 
commitments made towards liberalizing its economy.   In this regard, it is also noteworthy to 
understand that tariff structure has been streamlin ed and at present 80% of tariff lines are to be 
concentrated in 5%, 10% and 15% duty slabs.  The initiatives taken by Nepal, a LCD facing many 
constraints to integrate into the WTO system is  remarkable.  However it is our view that WTO 
Members should realize the vulnerability of Nepal' s economy and assist them in complying with 
WTO obligations where they badly lack expertise. 
132. We applaud the contributions made by Nepal sp ecially voicing the concerns of LDCs at the 
ongoing WTO negotiations.  Sri Lanka strongly shares Nepal vision for an open, equitable, 
predictable, non-discriminatory and rule based mu ltilateral regime which would serve the needs of 
developing countries, particularly LDCs.   WT/TPR/M/257 
Page 24  
 
  BRAZIL 
133. This is the first participation by Nepal in the TPR exercise. It is the culmination of efforts 
initiated back in April 2004, when the country ente red the WTO and formalized its commitment to the 
multilateral trade system. The Nepalese efforts in meeting commitments made during its long 
accession process have been highlighted in both the S ecretariat's and the Government's reports. Brazil 
recognizes and commends Nepal for such initiatives. We not e, in particular, that Nepal's tariff average 
is around 12%. As the Government has stated, its role in the national economy has been confined 
mostly to regulation and trade facilitation, leavi ng plenty of space for the private sector, including 
foreign investors.  
134. We are glad to notice that, since 2004, Nepal's nominal per capita GDP and its total volume of 
trade have nearly doubled. However, during that same period of time, Nepal's trade deficit has 
increased fourfold, as lack of diversity of its e xports and heavy reliance on remittances from abroad 
make the economy particularly vulner able to external economic shocks. 
135. Economic openness alone has not been able to  guarantee the strong development push that 
Nepal needs. The country still faces challenges, in pa rticular supply-side constraints, such as energy 
shortages and poor transport infrastructure. We welc ome, in this regard, the emphasis the Government 
has been putting on the development of infrastructure.  
136. We are also pleased to acknowledge that Nepal is  investing in its services sector. Given the 
logistic constrains landlocked least devel oped countries face to export goods, and Nepal's 
competitiveness in services, we are confident that such measures are about to have positive results in 
attracting foreign capital. 
137. Let now turn to bilateral re lations. Despite environmental complementarities, trade volume 
between Brazil and Nepal is still extremely modest, leaving much room for expansion. Brazil exports 
are heavily concentrated in meat products and our  imports from Nepal are, basically, carpets and 
textiles. Even though bilateral flow has increased over 20% in the last five years, mainly due to 
Brazilian growing imports, we reiterate our readin ess to work in a collaborative manner so that a 
further expansion can take place in the coming years. 
ZAMBIA 
138. My delegation endorses the statement made by Haiti on behalf of the LDCs.  We note the 
commitments undertaken by Nepal on the context of its accesion to the WTO, including the binding 
of 99.4% of its tariff lines and the reforms undert aken in the customs regime, and further measures 
that have been taken to facilitate trade and improve its investment climate.  However, we do note that 
Nepal still faces major challenges of diversification, low productivity and low level of FDI.  There is 
no doubt that Nepal being an economy which is hi ghly dependent on remittances is susceptible to 
external shocks.  It is therefore important that th e international community continues to support Nepal 
to deal with some of these challenges.  To this end,  I wish to stress as a contribution of this house to 
Nepal's smooth integration, we believe that the sp ecial differential treatment provision including the 
preferential market access initiatives by several  Members as well as the AfT Initiative are very 
important for the smooth integration of countries like Nepal into the multilateral trading system. 
139. I would also wish to commend our cooperating partners that have made it possible for 
countries like Nepal to utilise preferences to be ab le to access market and contribute to their 
economies, and also for their contribution to initia tives such as the Enhanced Integrated Framework 
and the Standard and Trade Development Facility, we believe that the continued support of our 
coperating partners to these initiatives remains very important.  WT/TPR/M/257 
 Page 25 
 
 
  140. I also wish to stress the importance of making operational the commitment of the decision 
that has been adopted by the Ministers on the Se rvices waiver, which we believe that Nepal has 
already shown the potential of the Services sector a nd we believe that this instrument can further 
contribute to enhancing Nepal's Services sector. WT/TPR/M/257 
Page 26  
 
  V. REPLIES BY THE REPRESENTATIVE OF NEPAL AND ADDITIONAL 
COMMENTS 
141. Let me recall the important observations made by the distinguished delegates. All of them 
appreciated Nepal's efforts and achievements in liber alizing trade and investment regime by reducing 
tariffs, simplifying trade and investment processes, binding almost all tariff lines as well as reforming 
and modernizing customs, among others. We have al so received positive comments on growth in total 
trade volume, increase in the per capita income, pr ivatization of public enterprises and opening up of 
service sector despite significant domestic as well as external constraints. 
142. Many delegates underlined the need to ove rcome supply side constraints, such as 
infrastructure bottlenecks in particular energy sh ortages as well as lack of road and transport 
networks. They also underscored the importan ce of taking appropriate measures to promote 
international trade by reforming investment regime to  attract investment in infrastructure building, in 
particular hydro-electricity and transport connectivity , and in other priority sectors such as tourism 
and agriculture. Similarly, they recommended initia ting necessary reforms in trade and investment 
related rules and regulations.  
143. On economic liberalization, as some of the dis tinguished delegates rightly pointed out, Nepal 
embarked on unilateral process of economic libera lization in the mid 1980s. The liberalization process 
gained momentum after our accession to the WTO. The major initiatives undertaken in the process of 
liberalizing our economy include abolition of the import licensing, removal of quantitative 
restrictions, simplification of export and import procedures, significant reduction on tariff rates and 
rationalization of tariff structure by reducing tariff sl abs, liberalization of the foreign currency regime 
including the full convertibility of current account, and major legal and institutional reforms. The 
liberalization process is ongoing as is reflected in cu rrent economic policies, national plans and annual 
budget and policies will be calibrate d as per the development needs a nd capacity. The Government is 
acting as a catalyst for the development while the pr ivate sector has been en couraged to take the 
leading role in the economy. 
144. We take note of the concerns raised by the distinguished delegates with regard to the 
performance of public enterprises. The Government of Nepal acknowledges the need to reform public 
enterprises. It has accordingly taken several measures in this regard including the formation of a High 
Level Public Enterprises Management Board to m onitor PEs' performance to ensure effective and 
efficient service delivery and make appropriate r ecommendations to address the situation in an 
appropriate manner. The Governme nt of Nepal has also adopted the policy of disinvestment.   
145. On trade facilitation, Nepal has accorded high pr iority to improve trade facilitation measures 
and taken some concrete steps to wards reducing transaction costs by simplifying the trade and transit 
related procedures and by developi ng and optimizing the utilization of cross border infrastructure such 
as ICDs/ICPs with the support of neighbouring countri es and  the development pa rtners.  Nepal is in 
need of international support to set up quality laboratories and testing facilities to meet international 
standards and certification. We are in the pro cess of building necessary legal regime for the 
establishment of an accreditation board and the bill to this effect is being drafted. 
146. In line with its commitment to rule based trade regime, the G overnment of Nepal has carried 
out major legal reforms after the accession to the WTO. The major legal reforms include the 
enactment of Competition Promotion and Market Pr otection Act, Insolvency Act, New Companies 
Act, Banks and Financial Institutions Act, Secure d Transactions Act, Electronic Transactions Act, 
Public Procurement Act, Customs Act and Inv estment Board Act, among others. Likewise, the 
process has already been started to enact a new I ndustrial Enterprises Act, Foreign Investment and 
Technology Transfer Act, Electricity Act, Banks an d Financial Institutions Act, Insurance Act, Nepal 
Electricity Regulatory Commission Act and Special Economic Zone Act.   WT/TPR/M/257 
 Page 27 
 
 
  147. The private sector in Nepal is gaining confid ence due to improvement in peace and security 
situation in the country. National consensus among the political parties and their commitment to good 
governance and the rule of law has also encouraged  the private sector to be active in national 
economy. The newly established National Business Fo rum remains instrumental in facilitating greater 
role of private sector in policy and implementation issues. The Government of Nepal plans to carry 
out several programmes for the further development of private sector.  
148. On agriculture, although agriculture is the b ackbone of the Nepalese economy, we have not 
been able to adequately develop the agriculture sect or mainly because of the prevalence of subsistence 
farming, fragmentation of land, inadequate infrastru cture, investment as well as agriculture inputs and 
extension services. 
149. In order to enhance productivity and protect th e agricultural land, the Government of Nepal 
has already initiated the process for the formulation a nd implementation of land use policy. It has also 
adopted measures for commercialization and mode rnization of production system. Moreover, the 
Government of Nepal has decided to develop and im plement scientific land reform program based on 
the report submitted by the high-level land reform co mmission. The Government is also committed to 
ensuring food security by increasing agricultural productivity as well as managing buffer stocks for 
food shortage areas. The other measures aimed at enhancing agriculture productivity include 
expansion of irrigation facilities, modern technique  of production, strengthe ning the supply chain and 
distribution system, provision of crop and livestock insurance, credit facilities as well as delivery of critical inputs and provision of improved market access. 
150. On tourism, as rightly pointed out by disti nguished delegates, tourism industry has high 
potential for the development of Nepalese economy. T hough this sector is yet to be developed fully, 
the Visit Nepal Year 2011 has provided encouraging a nd positive indications for its development.  In 
order to further develop this sector, the Government  is preparing an investment framework involving 
public private partnership. The proposed framework w ill include a master plan for sustainable tourism 
development. The key ingredients of the proposed master plan will cover development of tourism 
infrastructure, integrated tourism service centre, development of new and di versification of tourism 
products, development of places of historical and cultural importance, including Lumbini (the 
birthplace of Lord Buddha) and expansion of air co nnectivity including the construction of the second 
international airport, as well as e xpansion of immigration facilities. The private sector is encouraged 
to invest in tourism sector as well as air transportation. 
151. On investment, in order to create an investme nt friendly environment for both domestic and 
foreign investment, the Govern ment has declared "Investment Year 2012/2013" and established a 
high-level Investment Board. The Board plans to of fer all the investment related services through a 
single window and encourage projects that complement  each other such as hydro-power and tourism. 
The Investment Board also plans to come up with at least 10 projects in the next two years. Transparency in the functioning of the board will be maintained by setting up a regular monitoring 
mechanism. The Board would offer facilities to projects – from land acquisition to tax incentive 
within a framework. For this purpose, detailed rul es are currently being framed under the Investment 
Board Act in consultation with st akeholders and development part ners. These measures are expected 
to help channelize domestic and foreign investme nt toward productive sector, help potential investors 
identify and select their preferred investment sect or, reduce the cost of business and encourage the 
completion of large scale projects on time through foreign direct investment. 
152. Nepal offers attractive incentives for foreign i nvestment. Foreign investment is allowed up to 
100% in most of the sectors and sub-sectors. Under the relevant legal provision no private industry 
will be nationalized. Similarly, investors are guara nteed full repatriation of capital and profit earned 
thereon. Investors also enjoy facilities such as high gestation period and tax incentives and business 
and residential visas. The Government is committe d to establishing industrial peace by effective WT/TPR/M/257 
Page 28  
 
  implementation of the tripartite mechanism consisti ng of Government, employe rs and labourers, by 
discouraging strikes in commercial and industrial enterprises with the policy of no work no pay and 
by formulating and implementing social security plans for employees.    
153. On hydropower, energy plays a significant role in economic and social development. In order 
to overcome the energy shortage, the Government of  Nepal declared the energy crisis last year and 
various programmes were announced to deal with the crisis. The Government has given priority to the 
development of some large scale hydropower project s by the Nepal Electricity Authority through the 
mobilization of development assistance. Likewise, a ttractive incentives have been offered to private 
investors, who produce hydropower by mid-April 2015.  With the incentives provided by the Government, it is expected that 100 MW power w ill be generated within a year and 300 MW of 
power within three years. In addition, a Hydropow er Development and Investment Company has been 
formed as a mechanism to promote investment in energy sector by mobilizing domestic and external 
resources. 
154. On intellectual property rights, in order to ha ve a comprehensive nati onal intellectual property 
policy, the Government of Nepal has already starte d the process of reviewing the existing intellectual 
property regime. The process has already been starte d to establish an integrated organization with 
professional staffs to effectively protect, promote,  develop and manage i ndustrial and intellectual 
property rights. The Government of Nepal has recen tly approved the working plan prepared by the 
Copyright Registrar's Office for the full enforcemen t of the Copyright Act and the control of piracy. 
The Government plans to form a monitoring committee with the participation of government 
authorities and private sector to monitor the complian ce with the code of conduct. The Government is 
also taking strong measures to improve inter-agenc y coordination on IPR enforcement and strengthen 
the institutional capacity of the enforcement agencies.  
155. On remittances, they are currently contributin g around 20% to the GDP. Recognizing its role 
and importance in the economy, the Government of Nepal has decided to chan nelize remittance in the 
productive sector by issuing infrastructure development bonds. However, this sector remains highly 
vulnerable to external shocks. In order to ensure its  stability in the long run, the Government of Nepal 
has launched different programmes fo r skills development, diversifica tion of employment destinations 
and protection of the interest of Nepalese workers overseas. The Government is committed to utilizing 
capital, knowledge and skills of migrant wo rkers in national development process. 
156. On public procurement, though Nepal is not a party to the WTO Agreement on Government 
Procurement, the Government of Nepal has made serious efforts to systematize the procedures for 
public procurements and their reporting and mon itoring mechanism. A comprehensive and detailed 
Public Procurement Act and Public Procurement Rules are already in force. The Act and Rules 
provide for detailed and clear process and methods for procurement including e-procurement. In order 
to address the issues like removing procedural complexity and manage sectoral procurement, a bill amending the Public Procurement Act has already been registered in the Legislature-Parliament. 
Similarly, some significant changes in the Public Procurement Rules have been made to remove any 
ambiguities that might appear in the procurement process. 
157. On export promotion,  in order to promote export, the Trade Policy 2009 and Nepal Trade 
Integrated Strategy 2010 have been introduced, wh ich give priority to the identification of goods 
considered to have greater comparative advantag e and competitiveness. The trade policy aims at 
increasing the contribution of trade sector in natio nal economy, alleviating poverty and accelerating 
economic growth through expans ion of economic activities and employment. It emphasizes on the 
role of the private sector as the driving force fo r development with the government's role as a 
facilitator. Moreover, it focuses on the improvement of policies related to trade and institutional 
development, and the expansion of tradable commodities and service sector as well as the  WT/TPR/M/257 
 Page 29 
 
 
  development of Special Economic Zone. Improvement a nd simplification of the transit system is also 
an important component of the new trade policy.  
158. On miscellaneous issues, we understand the concer ns of the distinguished delegates in regard 
to the issue of export tariff on wood, we would like to  reiterate that Nepal still  requires export tariff to 
wood for environment protection. In addition, Ne pal does not have sufficient quantity of wood to 
export. We have increased vigilance to contro l smuggling of wood. As regards the issue of 
notifications to be submitted to the WTO Secretar iat, we are committed to provide these notifications. 
However, due to insufficient technical capacity we have not been able to do so. Technical assistance 
from WTO would facilitate this process. 
159. We take note of the concern expressed about po litical situation in Nepal. Our peace process 
has gained momentum following the signing of th e seven points agreement by political parties on 
1 November 2011. The process of the integration of th e agreed number of the Maoist combatants into 
the Nepal Army is being mainly finalized and hopefully some issues which are under discussion will 
be decided soon.  
160. Despite various efforts, Nepal has not been able to enhance its export. Trade imbalance 
continues to grow despite growth in export in abso lute terms. Enhancing the contribution of export to 
national economy remains a major challenge for us. As a LDC further handicapped by 
landlockedness, Nepal cannot overcom e multiple development challenges it faces on its own. For us, 
enhanced and scaled up international assistance beco mes an absolute necessity. We, therefore, call 
upon our valued development and trading partners to support our endeavours in promoting export by 
providing greater market access supported by simplifie d and facilitating rules of origin and enhanced 
financial and technical assistance in line with the Istanbul Program of Action for the LDCs. We also 
call upon our development partners to  take steps towards materializ ing commitments on investment as 
expressed in the Istanbul Programme of Action. Wh ile welcoming the recent decision of the MC8 on 
LDCs service waiver, we call for practical r ealization of this facility at the earliest. 
161. For a country like Nepal, which is constrained by infrastructure bottlenecks, the role of EIF 
and AfT assume special significance.  The fund in  EIF, given its multilateral nature and solely 
dedicated to LDCs, needs to be augmented in orde r to meet the acute needs to overcome the supply 
side constraints. It is also important to simplif y and streamline EIF processes in order to facilitate 
LDCs' easy access to the fund. We  also emphasize that the commitm ent to increase the share of Aid 
for Trade to LDCs should be fully honoured in li ne with Istanbul Programme of Action. Greater 
coordination and complementarities between AfT and EIF processes will ensure effectiveness of these 
vitally important funding mechanisms in favour of LDCs. We firmly believe that assistance coming 
from EIF and AfT should be additional to exis ting ODA and channelled th rough national budgetary 
system and should be based on the principles of na tional ownership and leadership while ensuring 
transparency and predictability.  
DISCUSSANT 
162. The remarks we heard at our previous meeting showed a remarkable agreement: the 
appreciation of Nepal's efforts to establish an open regime for trade and investment. While the 
political situation of the country has been difficult in the past there is a general feeling that the 
government of Nepal is taking many steps to tackle  the challenges the country faces and to improve 
the economic situation in general, including the frame work for trade. It will be essential for Nepal to 
pursue ongoing reforms which includes implemen ting legislation and further strengthening 
administrative capacity. 
163. Let me first concentrate on some of the challe nges that have been identified during the last 
session. We have heard about the to some extend unsatisfying economic deve lopment and the reasons WT/TPR/M/257 
Page 30  
 
  for this, which include supply-side constraints like a weak transport infrastructure, energy shortages 
and the shortage of high-quality professionals. At the same time we can observe some positive signs, 
like the fact that since 2004 Nepal's nominal per ca pita GDP and its total volume of trade nearly 
doubled. The real annual GDP growth since Nepal' s accession was on average 4.2%. Nepal has also 
succeeded in reducing almost by half its ratio of public debt to its GDP by improving its tax 
collection. 
164. Concerning trade policy colleagues have mentioned areas for improvement, like the 
enforcement of IPR protection, the implementation a nd monitoring of new legislation on government 
procurement and measures to improve the efficien cy of state-owned enterprises through well designed 
privatisation. 
165. I would like to highlight two points that seem urgent to me:  the first is the improvement of 
the poor standardisation and conformity assessment infrastructure. Progress in this area could considerably enhance Nepal's competitiveness.  Th e second is further improvement of the investment 
climate for FDI. Although a lot has already been  done, including the establishment of a Board of 
Investment and a one stop investor facilitation service , a variety of restrictions remain. I would like to 
refer to what has been said by some members and encourage Nepal to take further steps. 
166. At the same time I would like to stress the achievements Nepal has already made in 
liberalising its trade policy. Many Members high lighted the trade facilitation measures Nepal has 
already taken, like, inter alia, streamlining cust oms procedures and tariff structures, limiting the 
number of products subject to import licensing and the adoption of a new customs act. As a remarkable step for a LDC we have also seen th e adoption of a competition law, although Members 
identified some room for improvement in this regard. 
167. The positive effects of opening trade can be seen  in the area of telecommunication services. 
Other areas, like for example health care and tour ism could probably benefit from further steps of 
liberalisation. 
168. The fact that Nepal bound 99.4% of its tariff lines with an average MFN tariff of only 12.4%, 
eliminated a number of other duties and charg es and made extensive commitments under the GATS 
was widely commended. This is a remarkable step  by an LDC that shows the commitment of Nepal 
towards open trade. 
169. To further improve the economic development, inter alia , by multilateral trade the 
government of Nepal is actively working together with the relevant entities within the Enhanced 
Integrated Framework. As far as I know the aut horities of Nepal are committed and ambitious to 
implementing the projects defined within the EIF a nd contributing to the implementation of the Nepal 
Integrated Trade Strategy. They are eager to improve their work constantly so that they can make full 
use of the projects. And the government of Nepal has provided for an amount of about €500.000 in their current national budget for the implementati on of the NITS. Nepal is a good example of how 
important AfT is for LDCs. 
170. Many Members stated that their volume of trade with Nepal is still quite low at present but 
that they would see considerable potential for the fu ture. If Nepal continues to improve its legal as 
well as its factual framework for trade - for ex ample by implementing the 19 priority areas for 
diversifying its export basket - there is a good chance  that Nepal can benefit from this potential in the 
near future.  
171. In conclusion, this Review seems to have conf irmed that despite many challenges the country 
is facing, Nepal is on the right track. The government  has identified the most urgent steps and shows a 
lot of ambition to implement them as quick as possibl e. If this path is followed a further improvement  WT/TPR/M/257 
 Page 31 
 
 
  of multilateral trade and of the economic situation as a whole should be seen in due time. In doing so, 
Nepal might take into consideration the remarks and suggestions made by members at this trade 
policy review. I am convinced that this is a good basis for further improvements Nepal can make and 
we look forward to hearing about progress at the country's next policy review. 
EUROPEAN UNION 
172. Nepal's replies to our questions provide info rmation necessary to understand the situation in 
Nepal on issues raised in our first submission. We  have however prepared some follow-up questions 
in some areas where we would appreciate some further details. These concerns: Services, where we 
would appreciate more detailed information on the possibilities Nepa l is currently examining to 
further liberalise its services sector;  export duties on wood, where we are interested to learn whether 
Nepal has examined also other ways (other than e xport tax) to protect the e nvironment and its natural 
resources; rules of origin, where Nepal is invited to  elaborate on whether it has considered to lift the 
requirement to present a certificate of origin for all imports;  applied tariff for petroleum, where we would appreciate receiving more information on why Nepal's applied tariff for petroleum exceeds the 
bound level and Nepal's intentions in this regard;  and we have also asked for Nepal's intentions as 
regards ratifying remaining ILO core convention (8 7).  We will submit our follow up questions to 
Nepal in writing via the WTO Secretariat and hope Nepal will provide its replies within one month 
after the meeting, according to rules of TPRs. 
173. The EU hopes that this first Trade Policy Revi ew meeting has given Nepal some valuable 
feedback from other WTO Members on its trade policies and measures. We can once again acknowledge that since joining the WTO in 2004, Ne pal has made important steps towards integrating 
itself into the world economy. We encourage Nepal to  continue its efforts towards facilitating trade, 
increasing investments, strengthening administra tive capacity and enhancing the overall economic 
environment in a sustainable way. The EU remains co nfident that at the next TPR of Nepal we will be 
able to see further progress. WT/TPR/M/257 
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  VI. CONCLUDING REMARKS BY THE CHAIRPERSON 
174. This first Trade Policy Review of Nepal has given us a much better understanding of recent 
developments in its trade and trade-related polici es and practices together with the challenges it faces. 
We are grateful for the active participation of th e Nepali delegation headed by H.E. Mr. Lal Mani 
Joshi, Secretary of the Ministry of Commerce and S upplies.  I would also like to thank the discussant, 
Mrs. Christine Hochstatter of Germany, and Me mbers of the TPRB for contributing to our very 
fruitful exchange of views. 
175. Members commended Nepal for being the first l east developed country (LDC) to join the 
WTO through the full accession process in April 2004. Members noted, however, that since then 
economic performance has not resulted in the strong developmen t Nepal needs, with real GDP growth 
rate averaging about 4% per year. They encouraged  Nepal to address the supply-side constraints that 
impede higher GDP growth rates, notably  energy shortages, poor infrastructure, and labour strikes. 
Being a landlocked country, trading costs are also partic ularly high in Nepal and this is an issue that 
will merit Nepal's consideration. 
176. Members noted that trade policy is an integral part of Nepal's efforts to establish the 
conditions to reduce poverty and improve the living sta ndards of its people.  However, concerns were 
expressed about a worsening balance of trade, the falling participation of exports in its GDP and 
reliance on a few export products and markets. Members therefore urged Nepal to step up its efforts to 
diversify its export basket and seek new markets in  order to limit its exposure to external shocks. 
Some Members called upon developed Members to provide duty-free and quota-free (DFQF) market 
access to Nepal and other LDCs on prod ucts of export interest to them. 
177. Members acknowledged the relative openness of Nepal's economy as evidenced by a simple 
average applied MFN tariff of 12.2% in 2011/12, an d expressed their satisfaction that the adoption of 
the Customs Act and Regulation in 2007 simplifie d customs procedures in Nepal, while progress 
made in trade facilitation has also improved custom s clearance. At the same time, Members noted that 
there is still significant work to do in order to help exporters become more competitive. In that regard, 
weak standardization and conformity assessment infr astructure, lack of an accreditation system and 
sufficient testing facilities were mentioned. 
178. From a close examination of the observations made by delegations during this Review, the 
Nepalese authorities might consider introducing fu rther action or improvements in certain areas. I 
note from Nepal's concluding statement that action is  already being taken in several of these areas: 
 
• Investment and business framework:  Because of the high cost of doing business 
and the fact that certain sectors are still reserved for national investors, Members 
urged Nepal to further liberalize its investme nt framework and address issues of weak 
institutional capacity. 
 • Export taxes:   Questions were raised about the authorities' steps to review export 
taxes since levying export taxes discourages export of products and may not be the 
best way to achieve the Government's objectives. 
 • Government procurement:  While recognizing steps taken in this area such as the 
law on government procurement adopted in 20 07, Nepal was asked to elaborate on its 
plans to further improve the implementation and monitoring of its public procurement 
legislation.  WT/TPR/M/257 
 Page 33 
 
 
   • Competition:  There was  appreciation for the adoption of a competition law in 2007, 
which established the Competition Promotion and Market Protection Board.  
However, Nepal was encouraged to broade n the scope of the law since it does not 
apply, for example, to export business, and business relating to cottage and small 
industries. 
 • Privatization:  Questions were raised about Nepa l's privatization programme, on 
hold since 2008. Since public enterprises, in general, have performed poorly 
Members suggested that Nepal evaluate the results of its privatization programme and 
promote the participation of the private sector in the development process so as to 
increase productivity and reduce the fiscal burden. 
 • TRIPS:  Members welcomed that legislation on industrial property protection is 
under preparation and were interested to l earn about Nepal's actions for implementing 
TRIPS by July 2013, including initiatives to further improve IPR enforcement.  
 • Agriculture:  Since this sector plays a key role in creating jobs and the Government 
sees opportunities to broaden agricultural expor ts, questions were asked about Nepal's 
efforts to make agriculture more productive. 
 • Energy:   Given that addressing energy shortag es is crucial for Nepal to achieve rapid 
and sustained economic growth, Nepal was encouraged to use its abundant 
hydropower resources to meet its increasing demand for electricity.  
 • Infrastructure: References were made to the disadvantages that a weak 
infrastructure presents for exports to become more competitive. In that regard, the ten 
year sector-wide plan and a Priority Investment Plan were seen as positive 
developments. 
 • Services:   Further liberalization of services should improve the efficiency of the 
economy as a whole and the competitiveness of Nepalese exports, especially by 
reducing costs related to telecoms and tran sport. Tourism, a very promising sector 
given Nepal's vast cultural and biological wealth, should also benefit from increased liberalization. But it still faces challenges posed  by weak infrastructure, shortage of 
good quality accommodation and skilled manpower.  
179. In conclusion, I believe that this Review h as given us a comprehensive update on the trade 
regime of Nepal.  Nepal has been encouraged to pu rsue its regulatory and lega l reforms and to further 
adhere to WTO rules with a view to enhancing the tr ansparency of its trade regime and thus contribute 
to attracting foreign investment.  I recommend th at Members continue to support Nepal in its 
continuing efforts by providing further market acc ess to its goods and services and by responding to 
Nepal's needs for technical assistance and expertise. 
 
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