WORLD TRADE  
ORGANIZATION  RESTRICTED 
WT/TPR/G/257 
30 January 2012 
 
 (12-0581) 
Trade Policy Review Body Original:  English 
  
 
   
 
TRADE POLICY REVIEW 
 
Report by 
 
NEPAL 
 
   
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statement by Nepal is attached. 
 
 
Note: This report is subject to restricted ci rculation and press embargo until the end of the 
first session of the meeting of the Trade Policy Review Body on Nepal. Nepal WT/TPR/G/257 
 Page 3 
 
 
 CONTENTS 
    Page 
 
1. Introduction  5 
 
2. Macroeconomic Situation 5 
 2.1 Agriculture 6 
 2.2 Services  7 
  2.2.1 Remittance 8 
  2.2.2 Tourism 8 
2.2.3 Water Resources 9 
2.2.4 Information and Communication Technology 10 
2.2.5 Health and Education 10 
2.3 Industry  11 
2.4 Trade  12 
2.5 Investment 13 
2.6 Intellectual Property Regime 14 
2.7 Monetary Policy Management 14 
2.7.1 Monetary Situation and Inflation 15 
2.7.2 Foreign Exchange Management 15 
 
3. Economic Reforms 15 
 
4. Trade Policy, Procedures and Institutional Arrangements 16 
 4.1 Trade Policy 2009 16 
4.2 Nepal Trade Integration Strategy (NTIS) 2010 16 
4.3 Tariff  17 
4.4 Transit  17 
4.5 Single Window 18 
4.6 Institutional Arrangements 18 
 
5. Trading Arrangements 19 
 5.1 Bilateral  19 
 5.2 Regional 19 
 5.3 Multilateral 20 
  5.3.1 World Trade Organization and Nepal 20 
5.3.2 Aid for Trade and EIF 20 
5.3.3 Nepal in Informal Consultative Group of LDCs under WTO 21 
 
6. Constraints  22 
6.1 Long Political Transition 22 6.2 Difficult Terrain 22 
6.3 Geographical Location 23 WT/TPR/G/257 Trade Policy Review 
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     Page 
 
6.4 Limited Export Basket 23 
6.5 Weak Labour Relations 23 6.6 Inadequate Economic Infrastructure 23 
6.7 Inadequate Social Infrastructure 24 
6.8 Insufficient Skilled Human Resources 24 6.9 Inadequate TBT and SPS Infrastructure 24 
6.10 Inadequate Market Information 24 
6.11 Inadequate Trade Related Assistance 25 
 
7. Way Forward  25 
 
8. Conclusion  27 
 
9. Acronym  29
 
 
 
 Nepal WT/TPR/G/257 
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 1. Introduction 
1. Nepal is a mountainous and predominantly ag rarian land-locked country of 26.6 million 
people lying in the southern slopes of the Himala yas, bordering the Tibet Autonomous Region of the 
People's Republic of China in the north and India in the south, east and west.  The hilly and the 
mountainous regions including the great Himalayan range that has eight of the 14 highest peaks in the 
world above 8,000 meters account for 83% of the total land area of 147,181 sq. km. and the terai  plain 
accounts for 17% of the area.  Within its very sma ll stretch, Nepal possesses immense ethnic, cultural, 
climatic and biological diversities.  
2. Nepal emerged as a nation state after the unification drive of King Prithvi Narayan Shah in 
1770.  It has undergone three major democratic moveme nts in its political history:  the first one in 
1951 which overthrew the Rana family oligarchy and established a democracy with the prime minister 
as head of the government.  However, within the very short span of ten years' initial but very 
challenging democratic exercise, the king established Panchayat  polity as a front for an autocratic 
rule. The democratic movement in 1989 restored multiparty democratic system.  In 1996, armed 
conflict began in Nepal and political instability cr ept in. In 2006, Maoists and the seven major 
political parties signed a 12 point agreement to stop armed conflict and fight against the king's 
autocracy which led to the popular People's Movement II .  The successful conclusion of this 
movement established a new coalition government of  seven parties which signed the Comprehensive 
Peace Accord with the Communist Party of Nepal (CPN-Maoist) to permanently put an end to the 
decade long conflict.  In April 2008, the people elected a historical Constituent Assembly which also 
has the mandate to work as the parliament.  The Constituent Assembly abolished monarchy and 
established the country as a federal democratic republic. It is in the process of drafting a new democratic constitution, which will lay a ne w foundation for the country's socio-economic 
transformation.  
2. Macroeconomic Situation  
3. The average GDP growth rate since Nepal acced ed to WTO in 2004 is 3.8% during the period 
of 2004/05 to 2010/11.  Nepal is engaged in a tr ansformation process moving its economy away from 
predominantly agricultural sector to services and i ndustrial sectors though the desired changes have 
not been accomplished.  The contribution of the ser vices sector has been gradually increasing over the 
years.  Its share reached 50.1% of GDP in 2010/ 11 which was 45.9% in 2004/05.  The shares of 
agriculture and industry in GDP have been decr easing, reaching 34.9% and 15.0% in 2010/11 from 
37.4% and 16.6% respectively in 2004/05.  During the same period, nominal per-capita GDP has 
increased from USD 328 to 642.  The total volume of trade doubled in 2009/10 in comparison to that 
of 2004/05.  In the total trade volume, export shar e decreased drastically from 28.2% in 2004/05 to 
14.1% in 2010/11 and import share increased from 71.8% to 85.9%. 
Some major macroeconomi c indicators of Nepal 
Fiscal year 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 
 In NR billion at 2000/01 prices  
GDP in basic pricesa 463.2 480.4 493.7 522.3 542.0 563.5 583.0 
Agriculture 179.8 183.0 184.8 195.6 201.5 204.0 212.4 
Industry 79.9 83.5 86.8 88.3 87.1 90.0 91.2 
Services 220.6 233.0 243.5 261.4 277.1 293.9 304.5 
 Table (cont'd) WT/TPR/G/257 Trade Policy Review 
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 Fiscal year 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 
 Share of different sectors in real GDP  
Agriculture 37.4 36.6 35.9 35.9 35.6 34.7 34.9 
Industry 16.6 16.7 16.9 16.2 15.4 15.3 15.0 
Services 45.9 46.7 47.3 48.0 49.0 50.0 50.1 
GDP growth rate 3.2 3.7 2.8 5.8 3.8 4.0 3.5 
 In nominal prices  
Total trade  
(in NRs billion) 208.2 234.0 254.1 281.2 352.17 435.2 459.46 
Export f.o.b. 58.7 60.2 59.4 59.3 67.70 60.8 64.56 
Import c.i.f. 149.5 173.8 194.7 221.9 284.47 374.3 394.9 
Total expenditure  
(in NRs billion) 102.6 110.9 133.6 161.4 219.66 259.7 306.3 
Recurrent 62.7 67.0 77.1 91.5 127.74 151.0 180.2 
Capital 27.3 29.6 39.7 53.5 73.09 90.2 108.08 
Principal re-payment 13.5 14.3 16.8 16.4 18.83 18.4 18.04 
Total receipts  (in NRs billion)
 84.5 86.1 103.5 127.9 169.86 218.5 304.22 
Revenue 70.1 72.3 87.7 107.6 143.47 179.9 206.35 
Foreign grants 14.4 13.8 15.8 20.3 26.38 38.6 49.33 
Foreign loan 9.3 8.2 10.1 9.0 9.97 11.2 14.86 
Total population (in 
million) 24.48 24.82 25.17 25.52 25.88 26.24 26.60 
Per capita GDP (US$) 328 350 390 464 465 556 642 
Average annual pop. 
growth rate        1 . 4 %  
Foreign employment 139,718 165,252 204,533 249,051 219,965 294,094 354,716 
Exchange rate  
(NRS per 1 USD)b 72.06 72.32 70.49 65.02 76.88 74.57 72.27 
 
a After deducting FISIM. 
b Period average. 
 
Source: Government of Nepal, Ministry of Finance, Economic Survey 20 10/11, Nepal Rastra Bank, QEB. 
 
2.1 Agriculture 
 4. Traditionally Nepal is an agrarian country, agriculture contributing around 34.9% of total 
national GDP and more than 73% of total employm ent.  Agriculture occupies around 18% of total 
land area of the country, of which less than 50% of cu ltivated area is irrigated.  It is the backbone of 
rural livelihood.  Major agricultural products incl ude paddy, wheat, maize, barley, millet, potato, 
lentils, tea, sugarcane, coffee, ginger and large cardamom;  and some of these are also exportable 
products.  However, the sector grew at 2.81%, sligh tly more than the growth rate of the population, 
during 2004/05-2010/11.  Agriculture in Nepal, d espite six decades of development efforts, has 
remained underdeveloped.  Except a few commercia l farming, agriculture is suffering from low 
productivity, small and subsistence farming, land fragmentation, u se of primitive technology, low 
investment, lack of R&D, and poor input output market structure.  Besides, decreasing number of 
farm workers, inadequate irrigation and agri cultural extension services coupled with limited 
agricultural financing have had adverse effect on agricultural productivity.  
5. Agriculture is important for Nepalese economy not  only for providing an end product but also 
for raw materials to industries and tradable items .  Significant numbers of industries in Nepal are 
based on agricultural products.  Similarly, agricu ltural products occupy a considerable share in 
Nepal's export.  Realizing the importance of agriculture for national livelihood, promoting Nepal WT/TPR/G/257 
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 employment and income generation, earning foreign exchange, ensuring food sufficiency and meeting 
the need for consumption and trade, the Governme nt introduced a long-term Agriculture Perspective 
Plan (APP) for 20 years in 1995.  In continuation of the long-term agriculture plan, the Government is currently formulating Agriculture Development Stra tegy (ADS).  Especially after the recent global 
food crisis, it has put high emphasis on agriculture development.  Accordingly, it is undertaking 
several measures to correct the p ast inefficiencies of this sector.  In particular, it intends to 
commercialize the agriculture sector and enhan ce its production and productivity by expanding 
extension services and irrigation facilities, promoting the use of modern technology and R&D.  It has 
also emphasized cooperative farming.  
6. Trade Policy 2009 and the Nepal Trade Integra tion Strategy (NTIS) 2010 have identified 
several agricultural products such as lentils, tea, coffee, ginger, larg e cardamom, jute etc. as potential 
goods for export.  The organic farming is emergi ng as a potential sector for generating income and 
export.  The Government is planning to prom ote further the production and marketing of these 
products in order to increase agro and industrial pro duction, income, employment and trade.  In this 
regard, development of SPS laboratories in major cu stoms points is highly essential.  There is a need 
to create an internationally recognized accreditati on mechanism to standardize such laboratories. 
2.2 Services 
7. Service sector is emerging as a robust precinct of  the Nepalese economy in recent years.  In 
the last few years, it has grown significantly.  It accounts for around half of the GDP and absorbs around 18% of total employment.  Trade in services accounted for 69.9% of total convertible foreign 
exchange earnings whereas merchandise trade sh ared only 13.1% in average during the period 
between 2004/05 and 2010/11.  The share of service tr ade income in total in come has increased from 
62.4% in 2004/05 to 72.6% in 2010/11.  The average income from remittance, t ourism and interest on 
investment abroad is recorded at 83.7%, 12.4% a nd 3.9% respectively of total service income of 
convertible foreign exchange during the period 2004 /05-2010/11.  The average ratio of remittance to 
GDP during that period is 16.8% reaching 20.3% in 2009/10.  Similarly, the tourism earnings ratio to 
GDP is 2.5% on average, which increased from 2. 2% in 2004/05 to 2.8% in 2009/10.   
Income of Convertible Foreign Exchange (in NRs 10 million) 
Year 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 
Total 123,226.8 15,729.8 17,996.8 23,692.7 32,439.2 34,637.1 31,165.7 
Merchandise Trade Volume 2,085.2 2,173.9 2,236.7 2,866.3 4,049.7 4,439.6 3,844.8 
Per cent 16.9 13.8 12.4 12.1 12.5 12.8 12.34 
Service Trade Volume 7,688.4 10,927.5 12,694.0 16,679.3 23,445.5 24,880.1 27,320.9 
Per cent 62.4 69.8 70.5 70.4 72.3 71.8 87.66 
 Remittance Volume 6,178.5 9,274.9 10,741.7 13,942. 2 19,421.6 21, 399.9 23,296.2 
 Per cent 80.4 84.9 84.6 83.6 82.8 86.0 85.27 
 Tourism Volume 1,181.5 1,171.09 1,264.6 2,034.0 3,459.0 2,938.6 3,100.0 
 Per cent 15.4 10.7 10.0 12.2 14.8 11.8 11.35 
 Investment Volume 328.4 481.5 687.3 703.2 565.0 541.6 924.7 
 Per cent 4.3 4.4 5.4 4.2 2.4 2.2 3.38 
 
Source:  GoN, Ministry of Finance, Economic Survey 2010/11, Nepal Rastra Bank QEB. 
 
8. As trade in services mostly do not require tr ansport and transit facilities, LLDCs have more 
potentialities to promote service trade than merchandise trade and get benefit from it.  Nepal could be 
highly competitive in service trade.  Besides, the avai lability of human resources at low cost in almost 
all areas of service sector is an additional advantage to Nepal to develop the service sector.  The most WT/TPR/G/257 Trade Policy Review 
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 potential sectors/subsectors of service for Nepal are labour (mode 4), tourism, ICT, health, education, 
and hydroelectricity.  
2.2.1 Remittance 
9. The migrant worker sub-sector alone amounts to one fifth of GDP.  At the moment, 
remittance from migrant workers is contribut ing to stabilize the national economy.  Around 
1.96 million people are working abroad, especially in  Gulf Countries, Malaysia, Republic of Korea, 
Hong Kong, China and Israel.  The remittance has cont ributed to help reduce poverty significantly all 
over the country.  However, making foreign employm ent sector more secured, systematic and decent 
is a big challenge to the Government as it involves many factors.  Promoting foreign employment in a systematic and productive manner and utilizing re mittance in productive sectors are still challenging 
tasks.   
10. In this context, the Government has taken sever al measures to make this sector systematic, 
improve the working conditions and ensure maximu m benefits to the migrant workers as well as 
national economy.  For example, the Government has introduced a number of measures to regulate 
manpower companies and encourage them to send work ers through legal channels;  simplified rules, 
regulations and processes;  introduced remittance bond to utilize remittance mainly in developing 
infrastructure;  signed bilateral agreements with four recipient countries – UAE, Bahrain, Qatar and 
Republic of Korea;  fixed the maximum service charge within a reasonable limit;  fixed minimum compensation to the victims of accidents;  made insurance compulsory;  enforced legal provisions 
strictly;  launched massive awareness campaign;   provided vocational a nd language trainings and 
financial support;  encouraged financial transactions  through legal financial channels and so on.  
However, these efforts are found insufficient give n the increasing complexities and severities of the 
problems. 
2.2.2 Tourism 
11. Tourism is a highly potential sector contributi ng to national economy in terms of income, 
employment, foreign exchange and extending ma rket for domestic production of both commodities 
and services.  Its average ratio to GDP is around 2. 5% in the period between 2004/05 and 2010/11.  It 
is the second largest source of foreign exchange ear ning of the country.  The development of tourism 
sector is constrained mainly by political transition, weak infrastructure, unbalanced regional development, inadequate and ine fficient national flag carrier, poor international airport facility, low 
investment, lack of competitive human resources, li mited developed tourist spots, weak coordination 
among the various stakeholders including the lo cal communities in formulating and implementing 
long term tourism development plans and poor marketing. 
Tourists arrival and average length of stay (2001-2010) 
Year Total By air By land Average length 
of day of stay Number Annual growth 
rate (%) Number % Number % 
2004 385,297 13.9 297,335 77.2 87,962 22.8 13.5 
2005 375,398 -2.6 277,346 73.9 98,052 26.1 9.1 
2006 383,926 2.3 283,819 79.9 100,107 26.1 10.2 
2007 526,705 37.2 360,713 68.5 165,992 31.5 12.0 
2008 500,277 -5.0 374,661 74.9 125,616 25.1 11.8 
2009 509,956 1.9 379,322 74.4 130,634 25.6 11.3 
2010 602,867 18.2 448,800 74.4 154,067 25.6 12.7 
 
Source: Ministry of Tourism and Civil Aviatio n, "Nepal Tourism Statistics 2010". Nepal WT/TPR/G/257 
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 12. The Government has taken various measures to promote tourism.  The year 2011 was 
declared Nepal Tourism Year under which it undert ook several measures to promote tourism.  The 
tourism marketing has increased significantly both w ithin and outside the co untry.  Similarly, the 
Government has declared 2012 as Visit Lumbini Year .  It has also initiated the process to construct a 
second international airport in Nijgadh, Bara.  Simi larly, there is a plan to develop Bhairahawa, 
Pokhara, Biratnagar and Nepalgunj as regional airports .  It has significantly expanded and improved 
Tribhuvan International Airport, the only intern ational airport in the country.  Nepalese 
missions/embassies abroad are also assigned the task s of promoting tourism.  The Government has 
given tourism status of prioritized industries and provided several facilities to the sector under it.  It 
has also encouraged the involv ement and active participation of the private sector and local 
communities in tourism development, inter  alia, by introducing rural tourism, home stay and local 
tourism festivals.  The concept of home stay is  considered a unique important measure to expand 
employment, to reduce poverty especially in rural areas and to expand tourism infrastructure.  A 
Tourism Development Council has been constituted under the chairmanship of the Rt. Honorable 
Prime Minister.  Similarly, an autonomous Nepa l Tourism Board has been established to develop 
tourism in coordination with various stakeholders, mainly the private sector.  The board has private 
sector representation and has been given authority to  raise funds.  The board has been successful in 
designing and implementing various plans and campaigns  for the development of tourism.  Realizing 
that these efforts are not sufficient to enhance tour ism to a satisfactory level, the Government has 
recently formed a high level committee under the chairmanship of the chief secretary of the 
Government  to evaluate the current status, analyse th e future prospects and accordingly recommend 
actions for future development of tourism in Nepal.   Similarly, the Government is also considering 
promoting tourism in Nepal by dividing it in sever al tourist zones on the basis of their uniqueness and 
specialties.   
2.2.3 Water Resources 
 
13. Nepal is one of the richest countries in water r esources.  The Himalayan range is the abode of 
perennial source of water.  The whole Himalayan range above 16,000 feet, which is the snowline in 
Nepal, is covered with snow round the year.  There are around 6,000 rivers and rivulets crisscrossing 
the country.  In addition, there are several glaci ers and lakes in the Himalayan and high mountain 
ranges.  According to an estimate, it has the capacity  of producing 83,000 MW of electricity, of which 
43,000 MW is technically viable.  Nepal has a significant hydro resource base far greater than its 
foreseeable domestic requirement estimated at 1,650 MW in 2020, presenting an opportunity for 
regional trade that may bring substantia l economic benefits to the country.  
14. Despite huge hydro potentiality, Nepal is facing seve re energy crisis at present.  There is 
increasing daily power outage mostly in dry season due to both the low production and high demand.  
The total national demand during the dry season, when demand is highest for electricity, was 960 MW 
in 2010/11 while the maximum installed capacity of electricity is 700 MW.  All the hydroelectricity 
projects, except one, are run off the river type.  So  the total capacity is reduced significantly during 
the dry season, mostly in winter due to reduced flow  of water in rivers.  In the same time, making 
things worse, the internal demand becomes highest du e to increased winter consumption.  This creates 
intense pressure in the supply of electricity.  Th e big gap between supply and demand of electricity, 
especially in the dry season, h as created frequent and long-time power cuts, which has reduced 
production, increased cost and created uncertainty ov er smooth supply of products to the market.  All 
these factors are major contributors to make Nepali products less competitive in terms of both quality 
and cost.  WT/TPR/G/257 Trade Policy Review 
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 15. Despite the present constraints, Nepal aims to pursue development of its hydro resources in a 
cost efficient manner in order to be able to co mpletely transform the economy.  However, it will 
require prudence, vision and determination.  Ne vertheless, the Government has taken several 
measures to develop hydroelectricity.  It has reformed legal and institutional infrastructure and 
provided several financial and other concessions to at tract both domestic and foreign investors in this 
sector.  State-owned Nepal Electricity Authority, wh ich is mainly responsible for the production and 
distribution of electricity in Nepal, is being rest ructured and reformed.  After 1992, the Government 
has also opened up electricity production and distri bution for the private sector .  It has encouraged 
local community to be involved in micro hydro pr ojects by providing several financial and technical 
incentives.  It has also prepared several initial project reports for the development of many medium 
and big hydroelectricity projects.  Accordingly, sev eral project agreements have been signed with the 
private sector, mostly with foreign investors.  If im plemented properly, Nepal will be able to shed off 
the present power shortage and it will also be able to  export electricity.  The Government has recently 
established a Hydro-Power Investment and Deve lopment Company Limited to facilitate the 
investments in hydro-power sectors.   
2.2.4 Information and Communication Technology 
 
16. During the last two decades, the ICT has made a turnaround to the extent never experienced 
before, taking the world into a different arena of connectivity, and the sector is emerging as the fastest 
growing industry in the world.  If properly develo ped, it has a potential to emerge as an important 
trading item.  Proper development of internet connectivity and telecommunications can create 
immense opportunities in Nepal to benefit from comp etitive labor costs and time differences.  Nepal 
has already created a niche market in medical analysis and reporting to meet the increasing needs of 
the global health industry.  The market, presently, is small.  Yet the prospects are enormous and even 
the ability to get a small share will go a long way towards fastening the pace of economic 
development by creating conducive employment opportunities within the country.  The added 
advantage is that the transport and transit require ments do not hinder in any way.  The Government 
has initiated various efforts including formula tion of policies, enactment of the Electronic 
Transactions Act, establishing an information t echnology park and promoting human resources in 
ICT.  In addition, initiatives taken by the privat e sector including non-resident Nepalese (NRN) are 
encouraging.  Ability to develop world class human resources along with nece ssary infrastructure and 
establishing linkage with the market will go a long way in promoting ICT based trade. 
2.2.5 Education and Health 
 
17. Nepal, in view of its climatic  condition and location, does have a potential to be developed as 
an education/health centre.  Development of the world class educational and health institutions at 
appropriate locations will give the feeling of diffe rence while adding to comfort and ease to get there 
a prospect of attracting students, health care seeker s, aging population as well as promoting education 
and health based tourism, some of which have already started to emerge albeit at a small scale.  Nepal's advantages, in this respect, lie in soun d climatic condition, interesting and appealing 
physiographic features, and abundant supply of cari ng human resources at low cost.  Development of 
world class educational institutions with appropriat e image should assist to position competitively not 
only in the South Asian market but also in the worl d market.  Similarly, world class hospitals, nursing 
homes, aging homes and traditional learning, medita tion and knowledge gaining/sharing centers may 
have great appeal in the world market.  As an ex ample, learning Buddhism at Lumbini, the birth place 
of Lord Buddha, or the near vicinity should be ap pealing to any learner of Buddhist philosophy.  In 
nursing homes and aging homes, the availability of caring and hardworking manpower at low cost 
means Nepal may have potentiality to create a str ong niche market in the area.  All these will also Nepal WT/TPR/G/257 
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 complement the tourism business, and the diversificat ion in tourism services will also take place.  The 
Government of Nepal, while pursuing liberal economic policies, has opened up these sectors to 
private sector participation, which has led to subs tantial increase in educational and health facilities 
mainly catering, however, to the local population w ith limited efforts by service seekers.  Health 
services, initially targeted for Nepalese populati on, have made remarkable progress with the 
involvement of the private sector and establishment of a number of teaching hospitals.  NTIS has rightly identified health sector as one of the poten tial exportable services. In addition, the traditional 
Ayurvedic system of healthcare has taken mode rn approach and a few hospitals are providing 
healthcare service mainly to foreign patients.  Despite  these developments, there is a need to bring out 
more conducive policies and even place some incen tive schemes or develop necessary infrastructure 
to encourage investment and initiatives in a path breaking manner. 
2.3 Industry 
 
18. Industry is an important sector with an incr easing role in promoting trade and contributing 
through value addition.  Recently, however, th e industrial sector is performing poorly.  Its 
contribution to GDP is gradually decreasing from 16.6% in 2004/05 to 15.0% in 2010/11.  In 
particular, the share of manufacturing sector to GDP is  declining over the years, and it is around 6.5% 
in 2010/11.  Likewise, its share to total employment has shrunk to 6.0%.  Realizing the importance of industrial development, the Government has accorded  high priority to it since 1950s.  Accordingly, it 
started establishing public enterprises, in par ticular basic industries, with the assistance of 
development partners (DPs).  At that time, the G overnment, being strongly influenced by the doctrine 
of mixed economy, had adopted inward-looking econom ic policies.  However, these policies could 
not produce expected results.  The government enterp rises could not run well.  Rather, they turned 
into sick enterprises and as a con sequence, they drained scarce government resources.  Because of the 
closed economic policy, the private sector also coul d not flourish.  Industrial development has had to 
encounter various obstacles including long, cumbersome and non-transparent bureaucratic process;  
mass poverty;  high transport cost;  lack of capital;  use of obsolete technology;  poor human 
resources, in particular lack of technical manpower;  private sector un-friendly industrial policies;  insufficient infrastructure, especially energy and tr ansport network;  poor coordination with other 
economic sectors, particularly in terms of creating backward and forward linkages;  etc. were other 
major hurdles to industrial development.  
19. Following the 1990s democratic change, the Government adopted open economic policies 
and started promoting the private sector confining its own role to regulating and facilitating rather 
than participating in the business in a direct way.   The new policies have addressed, to some extent, 
many of the above mentioned problems and have brought relatively good results.  The private sector 
led industrial development started to  flourish.  As a result, currently the private sector is the dominant 
player in the economy.  The Government, in additi on to adopting private sector friendly policies, has 
launched several measures to enhance industrial deve lopment such as providing financial, procedural 
and other concessions to the industries, accorded high priority to FDI, and focused to create 
investment friendly environment.  It has enacted Industrial Enterprise Act, Foreign Investment and 
Technology Transfer Act, Company Act, Privatizati on Act and incorporated ma ny other related legal 
provisions in different Acts.  It also privati zed many public enterprises during 1990s.  However, 
despite the Government's sincere efforts, the industr ial development is not at a satisfactory level.  
Rather, the manufacturing sector is shrinking in recen t years.  It is mainly due to the decade long 
armed conflict, political instability, weak law and order situation and poor la bor relations.  Taking 
into account all these considerations, the Governme nt has recently promulgated Industrial Policy 
2010, including measures to remove weaknesses of industrial development and promote industrial 
environment.  This Policy has also incorporated  issues relating to the protection of intellectual WT/TPR/G/257 Trade Policy Review 
Page 12 
  
 property.  In its pursuit to improve the industrial e nvironment further, the Government has a plan to 
introduce a new Industrial Enterprises Act and h as taken some initiatives for framing a separate 
intellectual property policy in the near future.  The Government has recently mediated between 
laborers and employers to strike a deal on mi nimum wage, implementation of no work no pay 
principle and four years' moratorium on strikes.  The Government has declared the fiscal year 2012/13 
as National Investment Year.  All these efforts are expected to bring a positive trend in the development of industries in the country. 
2.4 Trade 
 
20. Trade is one of the most important components of Nepalese economy.  Currently total foreign 
trade ratio to GDP is around 37%.  The trend of expor t is not positive as it tended to be stagnant and 
declined in relative terms from (-) 14.9% in 20 04/05, the ratio reached (-) 27.7% in 2009/10.  
Similarly, the average ratios of export and impor t with GDP in the same period were 12.1% and 
32.9% respectively.  The ratio of export to GDP has decreased from 14.6% in 2004/05 to 8.7% in 
2010/11.  But the ratio of import to GDP has increased from 29.5% in 2004/05 to 37.4% in 2009/10.  
Compared to the average growth rate of total trad e at 16.1%, the average growth rates of export and 
import are 1.0% and 20.4% respectively from 2004/05 to  2010/11 clearly indicating that imports have 
tended to grow significantly while exports have tende d to be static.  After the accession of Nepal to 
the WTO, the share of export in total trade decreased from 28.2% in 2004/05 to 14.5% in 2010/11 in comparison to the increase in import from 71.8% to 85.9% during the same period.  
Nepal's trade scenario 2004/05-2010/11 (in NRs billion) 
Year Total Export Import 
Volume Per cent Volume Per cent 
2004/05 208.2 58.7 28.2 149.5 71.8 
2005/06 234.0 60.2 25.7 173.8 74.3 
2006/07 254.1 59.4 23.4 194.7 76.6 
2007/08 281.2 59.3 21.1 221.9 78.9 
2008/09 352.2 67.7 19.2 284.5 80.8 
2009/10 435.2 60.8 14.0 374.3 86.0 
2010/11 459.46 64.56 14.1 394.9 85.9 
 
Source:  GoN, Ministry of Finance, Economi c Survey 2010/11and Nepal Rastra Bank. 
 
21. The big gap between export and import is gene rating huge trade deficit as well as creating 
foreign exchange burden to the economy.  The tota l value of the imports of one product, viz. 
petroleum products is greater than the total valu e of all the commodities exported.  In addition, 
Nepal's trade, especially the export trade, is highly concentrated on few items and few markets.  Major 
10 export items cover around 40% of the total exports .  The major export products are iron and steel, 
textiles, woolen carpets, garments , pashmina , tea, coffee and large cardamo m.  Nepal's exports go to a 
very few countries, mainly to India, USA, Banglad esh, Germany, UK, France, Turkey, Canada, Italy, 
China and Bhutan.  The export to Bangladesh and B hutan is gradually increasing in recent years.  
Their emergence as the important export destinations , if sustainable, will also enhance Nepal's trade 
competitiveness as these countries are geographically nearest to it, have almost similar economic 
culture and are linked with roads and railways with  fewer problems in transportation and transit.  
22. Nepal's major imports include petroleum pr oducts, iron and steel, machinery and parts, 
transport vehicles and their parts, electronic and electrical equipments, pharmaceutical products, gold, 
telecommunication equipments and parts, crude soya bean oil, polythene granules, and chemicals.  Nepal WT/TPR/G/257 
 Page 13 
 
 
 Nepal's ten major source countries of imports are In dia, China, UAE, Indonesia, Argentina, Thailand, 
the Republic of Korea, Malaysia, Japan and the United States.  India is the largest trading partner of 
Nepal both in terms of export as well as imports.  India absorbs 67.5% of total trade consisting 66.9% 
of total exports and 67.6% of total imports.  The reaso ns for this concentration of trade with India are 
its physical proximity, similarity in culture, re ligion and language, long-st anding preferential trade 
agreements, and 1,700 kms of open border. 
23. Nepal imports mainly petroleu m products, machinery, medicin es, clinker and cement, high 
tech products, automobiles, electronic and electrical  products, chemicals etc. from India while it 
exports mainly medicinal herbs and agricultural pr oducts, garments, raw skin , some semi processed 
products, instant noodles, zinc plates, etc. to India.   Nepal has signed three separate agreements on 
trade, transit and control of unauthorized trade betw een the two countries to promote trade with India.  
Considering their close political, social and cultural relations, the trade potentiality may be much larger.  However, the increasing trade deficit with  India that accounts for 56.5% of the total trade 
deficit has created serious problems in the balan ce of trade of Nepal.  Nepal's ever-growing 
dependence on a single country indicates the urgency for trade diversification and indicates need for 
strengthening its competitiveness to attain this end.   Nepal faces several problems in its foreign trade 
with third countries mainly due to long transit route, long and complex administrative procedures, SPS and TBT related issues.  
2.5 Investment  
 24. The Government has introduced new investment policies in order to attract foreign direct 
investment through the promulgation of new Industr ial Policy 2010 and the Board of Investment Act 
2011.  The Government has declared attracting FDI as one of its major objectives and has adopted several measures accordingly.  The most important one  is the legal provision that there will be no 
nationalization of private industries.  The pro posed Intellectual Property Policy will be another 
milestone in this regard.  Now, the challenge is to  implement these measures in practice.  In addition, 
the Government has declared fiscal year 2012/13 as the National Investment Year and has formed a 
High Level Preparatory Committee under the chairmanship of Rt. Honorable Prime Minister comprising senior government officials and private sector dignitaries as its members.  It is also working to provide additional facilities to the invest ors, especially to the foreigners.  Recently, in 
coordination with the private sector, the Government  has prioritized five areas for foreign investment, 
viz. hydro electricity, infrastructure and developm ent, agro processing and herbs, tourism and other 
services and minerals and mine related projects.  The Government is further working to develop 
50 potential projects which can be recommended to th e foreign investors seeking potential projects for 
investment.   
25. In order to assure foreign investors and increase  the inflow of foreign investment into the 
country, the Government has conc luded Bilateral Investment Prom otion and Protection Agreements 
(BIPPA) with six countries including India.  Simila rly, double taxation avoidance agreement has been 
signed with major trade partners.  Such agreements  are expected to improve trade and investment 
environment to increase the flow of foreign invest ment in the country.  The Government, in close 
coordination with the private sector, organized an International Investment Forum in October 2011 in 
which the Rt. Honorable Prime Minister assured th e foreign investors that the Government would 
provide them legal and financial pr otections as required to protect their investment and interest.  The 
next forum is planned for 2012.  In the meantime, Nepal, in collaboration with Asian Development 
Bank, also organized a meeting of the Asia Pa cific Investors Forum in October 2011 in which 
investors interested in investing in energy sector  were invited.  In the same way, non-resident 
Nepalese are also encouraged to invest in Nepal.   In addition to these efforts, the Government has WT/TPR/G/257 Trade Policy Review 
Page 14 
  
 formed Nepal Business Forum in cooperation with  the private sector and the academia with the 
objective of providing a platform to business stake holders to discuss economic issues including trade. 
2.6 Intellectual Property Regime  
 26. Nepal considers the protection and promotion of  intellectual property as a dynamic tool for 
wealth creation and cultural development.  Therefor e, an effective and ade quate intellectual property 
protection and promotion system, respecting both the needs of the creators of intellectual property as 
well as consumers is essential. It is also important to attract technology transfer.   
27. Realizing the importance of intellectual prope rty rights, Nepal became a member of the 
World Intellectual Property Organization (WIPO) on 04 February 1997 and a party to the Paris 
Convention on 22 June 2001 and the Berne Conventi on on 11 January 2006.  In order to make IP 
regime more meaningful, efforts on modernizati on and automation of intellectual property offices, 
human resources development, provision of legal a dvice on compatibility of legi slation with relevant 
international treaties, formulation of new IP relate d rules and regulations c onsistent with the TRIPS 
Agreement and assistance in strengthening capac ities to enforce intellectual property rules are 
underway. 
28. The legal framework for the protection of inte llectual property is provided in the Patent, 
Design, and Trademark Act, 1965 and the Copyright  Act, 2002.  Under these Acts, national and MFN 
treatments are granted.  National and foreign citizen s have to register the trademarks, patents and 
designs with the competent authority.  On industr ial property rights, the implementation and execution 
of relevant policies and regulati ons is the responsibility of the Department of Industry (DOI).  
29. Under the Copyright Act, automatic protection is  available for all copyrightable works.  The 
Copyright Registrar's Office is already in opera tion. The Office is the authorized agency for 
registering copyrights and hearing complaints.  The d ecisions of the Registrar may be appealed to the 
Appellate Court. 
30. In order to provide effective and adequate prot ection to all categories of intellectual property 
in conformity with the provisions of the TRIPs Agreement, the Government is preparing a new 
Industrial Property (Protection) Bill.  The new Act would incorporate all the substantive provisions of 
the TRIPS Agreement and it will replace the existi ng Patents, Designs and Trademarks Act, 1965. 
31. Nepal respects all the provisions of the TRIPS Ag reement.  However, Nepal is also entitled to 
the concessions and flexibilities provided to the LDCs in the Doha Declaration on the TRIPS 
Agreement and Public Health.  It has been worki ng with other LDCs in regard to the existing WTO 
negotiations on TRIPS Agreement, especially regard ing the decisions to be taken in favor of the 
LDCs. 
2.7 Monetary Policy Management 
 
32. Since 2003, Nepal Rastra Bank (NRB), the centr al bank of Nepal, has started to announce 
annual monetary policy on a regular basis.  The primary objectives of the monetary policy as mandated by the new Nepal Rastra Bank Act, 2002 ar e to provide more autonomy to the Bank so as to 
maintain macroeconomic as well as financial sector stability.   
33. As of July 2011, the number of banks and fina ncial institutions has reached 219, comprising 
31 Commercial Banks, 87 Devel opment Banks, 80 Finance Companies and 21 Microfinance 
Development Banks.  Following the commitment made in the WTO, Nepal has opened up the Nepal WT/TPR/G/257 
 Page 15 
 
 
 financial sector allowing foreign bank branches to  carry out wholesale banking since January 2010.  A 
moratorium on bank license applications has been im posed except for microfinance banks.  It also has 
been eased for development banks with the aim to consolidate the banking sector and promote 
banking services in rural areas.  
2.7.1 Monetary Situation and Inflation 
 
34. Nepal Rastra Bank compiles three monetary aggregates namely Narrow Money (M1), Broad 
Money (M2) and Broad Money Liquidity (M3).  Br oad money supply increased by 9.5% in 2010/11 
compared to a growth of 14.1% in the previous y ear.  The average growth of money supply remained 
at around 16.0% during 2004/05-2010/11.  In the fi rst three months of 2011/12, M2 increased by 
6.8% compared to a growth of 1.1% in the corresponding period of the previous year.  Broad money expanded during the period on account of remarkab le increase in net foreign assets as well as net 
domestic assets of the banking system.  Nepal Ra stra Bank is going to publish Broad Monetary 
Survey in the very near future.  The annual aver age consumer price increased by 9.6% in 2010/11, 
same to that of the previous year.  The inflati on rate averaged at 8.0% during the period between 
2004/05 and 2010/11.  The inflation remained stab le at 8.9% in mid October 2011 as in the 
corresponding period of the previous year.  The infla tion rate is expected to moderate by the end of 
the 2011/12. 
2.7.2 Foreign Exchange Management 
 
35. Nepal adopts market exchange rate system pegge d with the Indian rupee given the extensive 
and growing commercial ties with India.  Th is arrangement has provided an anchor for 
macroeconomic stability and has been instrumental in  anchoring inflation broadly in line with price 
developments in India.  Full convertibility in the current account has been provided since 1993 and 
Nepal has accepted the obligations of Article VIII of  the Articles of Agreement of the IMF with no 
restrictions on the making of payments and tr ansfers for current international transactions. 
36. Foreign Exchange reserve stood at  USD 3.84 billion as of mid July 2011.  It further soared up 
to USD 4.16 billion in the first three months of 2011/12 owing to strong remittance inflows and 
improvement in service receipts.  The current level of reserve is sufficient to cover 8.6 months' of merchandise and service imports.  
3. Economic Reforms 
 
37. Nepal started economic reform measures in mid-1980s in pursuance of the Structural 
Adjustment Program in cooperation with the IMF and the World Bank.  This process was further 
intensified in 1992 when the newly elected demo cratic government brought a sea change in the 
economic and trade policies.  It tried to inject a new life in the economy by liberalizing the national 
economy;  adopting several liberalized and privat e sector friendly policies, enacting new rules and 
regulations and establishing new institutions;  privatizing public  enterprises, and giving due 
importance to the private sector in the economy.  
38. Nepal undertook several measures in improving and facilitating trade along with pursuing 
more liberalized policies like streamlining tariff commensurate to commitments, the development and 
operation of trade related infrastructure, such as Inland Clearance Depots (ICD) in four major customs 
points, and more importantly, Nepal obtained the membership of the WTO in 2004, which is a 
milestone towards liberalizing and mainstreaming Nepal's trade into global trading system.  The WT/TPR/G/257 Trade Policy Review 
Page 16 
  
 Government has confined its role mostly to regul ation and facilitation, while leaving the operating 
role to the private sector including the foreign investors. 
39. In order to facilitate the investment process a nd solve the problems of investors immediately, 
the Government has established an Industrial Promo tion Board under the chairmanship of the Minister 
for Industries.  It has also established one window committee in Department of Industries to provide 
all kinds of services to investors and entrepreneurs under one roof.  Similarly, it has also simplified 
visa rules to provide business visa to all investors and their family members.  The Government has 
permitted full repatriation of income earned from th e investment in Nepal.  The same rule is 
applicable to reinvestment also.  Foreign compan ies registered in Nepal can purchase, own and sell 
land.  There are also legal provisions for disput e settlement through arbitration in accordance with 
prevailing arbitration rules of the UNCITRAL.  The Industrial Enterprises Act, 1992 ensures that no 
private industry will be nationalized.     
40. The encouraging economic growth of early 1990s  did not last long mainly due to the decade 
long armed conflict that started in 1996 and ended in 2006 following the signing of the Comprehensive Peace Agreement in November 2006.  Along with the embarkation on the peace 
process, the Government has brought out new policies in the areas of trade, industry, communication, 
and tourism.  As a result of this, some positive tr ends are noticed in the economy including in tourist 
arrival, improvement in balance of payment position,  and trade growth.  Nepal has slightly improved 
its ranking by three points in Doing Business Report 2012 . 
4. Trade Policy, Procedures and Institutional Arrangements 
 
4.1 Trade Policy 2009 
 
41. With the changed context, the Government has introduced a new Trade Policy in April, 2009 
replacing the Trade Policy, 1992.  It is a comp rehensive and updated policy which was framed and 
brought into implementation after Nepal became a member of the WTO.   It is consistent with the 
principles of WTO and adheres to the principles of liberal, open and transparent economic system.  It 
emphasizes on private sector-led competitive economy.  The main objective of this policy is to 
increase contribution of trade sector in national eco nomy and thereby reduce poverty and accelerate 
economic growth.  The new Trade Policy, besi des emphasizing trade in goods, has also duly 
recognized trade in services and intellectual property equally as potential trade sectors for Nepal.  
This policy includes an exhaustive list coveri ng from institutional strengthening to legal and 
procedural reforms in order to create conducive envi ronment for trade in the country.  These measures 
and provisions are supposed to enhance country's trad e both internally and externally.  The policy has 
broadly classified potential Nepalese exports into two categories:  Special Focus Area and Thrust 
Area Development.  Four products are included under special focus area, most of which have already 
been established in the export market.  Newly emer ging fifteen products have been listed under the 
second category.  Currently, the Government is pr eparing a detailed action plan to expedite the 
implementation of this policy.  
4.2 Nepal Trade Integration Strategy (NTIS) 2010 
 
42. Nepal launched a detail study of its trade se ctor which was called the Diagnostic Trade 
Integration Study (DTIS) with the technical and fi nancial assistance of Integrated Framework (If) in 
2003.  This was a very useful comprehensive study.  But due to several reasons, especially the lack of 
technical and financial support by the DPs and political  turmoil in the country, this study could not be 
implemented properly. Nepal WT/TPR/G/257 
 Page 17 
 
 
 43. The IF, after its reincarnation as EIF, again star ted the same program as major component of 
its technical support to LDCs.  Ne pal undertook the task of updating DTIS, which it renamed as Nepal 
Trade Integration Study (NTIS), in 2010.  This is a very pragmatic, comprehensive and in-depth study 
which elaborates the current status, the constraints an d future prospects of trade and also suggests the 
necessary future actions to be undertaken to promot e trade.  It complements Trade Policy 2009.  The 
NTIS has identified four major challenges in enha ncing its export trade, which include ensuring 
proper market access, building domestic support in stitutions, strengthening the supply capacities and 
mobilizing overseas development assistance.  In or der to face these challenges, the strategy has set 
four major objectives:  strengthen trade negotiations (especially bilateral);  strengthen the technical 
capacity of domestic non-tariff barriers (NTB) and other business environment supporting institutions;  
strengthen the export capacity of 'inclusive' e xport potential goods and services, and strengthen the 
Government's capacity to coordi nate and manage Trade-Related Technical Assistance (TRTA) and 
Aid for Trade (AfT) and to implement the NTIS .  It has also recommended 258 action plans as 
necessary for the promotion of trade and to improve  its contribution to GDP.  It has identified 
19 products comprising 12 commodities and 7 ser vices as major export potential items that can 
contribute significantly in the promotion of export.  It has also identified 10 major potential markets 
for Nepalese export.  Now the challenge is to fully implement the recommendations of NTIS.  The 
Government, with firm determination to implemen t the study in a holistic manner, has formally 
adopted NTIS as its mid-term national trade de velopment strategy.  MOCS has started its 
implementation process.  However, thorough impl ementation of all NTIS' recommendations is not 
possible from the Government's own limited resour ces and technical capacity.  Therefore, the DPs 
have been requested to support its implementation.  In this process, the Government would like to see 
the individual donors committing to implement some pa rt of the implementation matrix in such a way 
that all recommendations of the NTIS are implemented within the timeframe of five years as stipulated in NTIS in a coordinated and coherent manner. 
4.3 Tariff 
 
44. Nepal bounds 99.4% of tariff lines at HS 8 digit level.  The simple tariff average is 12.1% 
which was 13.8% in 2003/04.  Currently, there are six slabs and 5,168 tariff lines at HS 8 digit level, which was 5,351 before the accession to the WTO.  Th e tariff structure has been streamlined over the 
years and now the highest level of tariff has been reduced from 130% to 80% applicable mostly for 
vehicles.  Almost 80% tariff lines are concentrated in 5%, 10% and 15% duty slab.  
45. The Government has taken several initiatives to ensure its commitments towards the 
liberalized economy.  The examples of some major reforms in this regard include the reduction in 
tariff-slabs and rates;  abolition of  different non-tariff taxes;  introdu ction of Value Added Tax (VAT);  
application of HS codes for Customs Tariff;  use of the WTO Customs Valuation Agreement;  
enactment of new Customs Act, Rules and regulations  for further transparency and simplification of 
process;  limiting import restrictions to safeguard health, environment, security and archaeological 
properties;  and rolling out of ASYCUDA to majo r customs offices by using Broker Modules and 
Selectivity Modules.  Customs procedure has been  simplified by introducing new customs codes and 
procedures, using ASYCUDA++ for clearance in 10 major customs offices a nd risk based clearance 
in 5 major customs offices.  
4.4 Transit  
 
46. Nepal has a few major corridors for internationa l trade.  Kakarbhitta, Biratnagar, Birgunj, 
Bhairahawa, Nepalgunj, and Mahendranagar are the major corridors in the southern part of the 
country, whereas Tatopani is the only corridor availabl e for international trade in the north (i.e. with WT/TPR/G/257 Trade Policy Review 
Page 18 
  
 the People's Republic of China).  Majority of Nepa l's foreign trade is being channelized through these 
customs points.  India has remained a leading trade partner of Nepal and most of Nepal's foreign trade with third countries has to use transit routes that p ass through the Indian Territory.  The movement of 
transit traffic from Kolkata and Haldia ports to Ne pal is governed by the Treaty of Transit and Rail 
Service Agreement between Nepal and India.  Besid es the Treaty of Transit, the Government of Nepal 
and the Government of India have entered into  Rail Service Agreement for operating and managing 
the rail service for transit traffic between Kolkata/Haldia ports in India and Birgunj in Nepal via 
Raxaul in India.  Nepal is also considerin g using Vishakhapatnam port for transit.  
47. Nepal and Bangladesh signed a bilateral agreemen t on transit in 1976.  There are six transit 
points, namely Chittagong port, Khulna-Chalna port,  Birol point, Banglabandh point, Chilhati point 
and Benapole, in Bangladesh.  Ch ittagong and Khulna-Chalna are sea por ts and others are land border 
points at Bangladesh India border.  A bilateral agr eement was signed between India and Nepal to open 
the Kakarvitta-Panitanki point to Phulbari-Banglab andh point which is the shortest route (44 km) 
from Nepal border to Bangladesh border and Mongla por t.  Nepal is still usi ng Birol and Banglabandh 
points.  In addition as rail connection is possi ble, Rohanpur-Singhabad has been recommended. 
Necessary study on the feasibility of the route has al so been conducted but the Government is yet to 
make necessary arrangement/amendments to make this  route fully operational.  There are problems of 
transport connectivity, infrastructure and other trad e facility related problems such as management of 
borders, customs, and transit traffic to and from Bangladesh. 
48. The cost of doing business is very high due to transport cost in land-locked least developed 
countries (LLDCs).  Hence, streamlined cargo- customs procedures including transit routes are 
important in reducing transit costs for traders.  In the same way, transport and transit infrastructures 
are also important for strengthening people-to-p eople contact and expanding businesses, trade and 
investment opportunities between countries and also within the region.  Therefore, transport and 
transit infrastructure is considered as one of the mo st important determinants of trade competitiveness, 
particularly of LLDCs, and has remained an impor tant topic of international trade cooperation. 
4.5 Single window 
 
49. Despite several attempts to streamline tr ade and transit procedures through document 
simplification and legislative changes, the Governme nt realizes the need to further enhance trade 
facilitation measures.  Department of Customs ha s initiated reform program  on automation and is 
planning to provide web based clearance system.  In  this series, the Government is moving forward to 
put foundation for the national single window, whic h may further be extended to bilateral and 
regional levels.  The Government envisages the single window as an effective instrument to 
streamline trade procedures and reduce transacti on costs for doing business across the border. 
4.6 Institutional Arrangement 
 
50. The Government, with a view to promote i nvestment and facilitate trade, has arranged 
necessary institutional set-up and mechanisms.  Rece ntly, Board of Investment has been constituted 
under the chairmanship of Rt. Honorable Prime Minist er to increase the inflow of foreign investment 
especially in infrastructure building.  Board of Trade (BOT) and Industrial Promotion Board (IPB) 
have been set up under the chairs of Minister  for Commerce and Supplies and the Minister for 
Industries respectively, to gear up trade and indus try and provide necessary guidelines.  A high level 
Nepal Business Forum has been established to en sure better link through regular dialogue and 
deliberations between the private and the government sector to identify and reso lve issues that affect 
trade and investment in the country.  Similarly, Trade and Export Promotion Centre has been created Nepal WT/TPR/G/257 
 Page 19 
 
 
 to carry out trade promotion and marketing activities vigorously.  Trade Policy 2009 has envisioned 
developing TEPC into Trade Promotion Institute which will function as an autonomous organization 
capable of providing services as per demands of the market.  Nepal Inter-Modal Transport Development Board is the responsible agency to  oversee the operation of Inland Clearance Depots 
(Dry-ports) in four major customs points of th e country.  Initiatives have been taken towards 
establishing integrated checkpoints in major cust oms and thereby smoothening import and export.  
Priority is being given to expand and run dry-ports in all the major customs points of the country.  In 
order to boost export products, processes towards es tablishing Special Economic Zone (SEZ) in major 
business hub of the country have been initiated.  In this regard, the Government has drafted a SEZ Bill 
and tabled it in the parliament for its approval.  With a view to providing research based policy 
feedback and technical support to the Ministry of Commerce and Supplies, particularly to facilitate 
bilateral, regional and multilatera l trade negotiations, the Governme nt is setting up a Trade Policy 
Analysis Wing (TPAW) comprising of trade experts and professionals, under the umbrella of Ministry 
of Commerce and Supplies.  Similarly, a Trade A dvisory Committee has been formed consisting of 
former Commerce Secretaries and private sector l eaders to provide policy feedback on concurrent 
trade and transit related issues. 
5. Trading Arrangements 
 5.1 Bilateral 
51. India has remained the largest trading partner of Nepal at most of the times in histories.  
Nepal signed a path breaking Trade Treaty in 1996 opening Indian market extensively, which was 
amended later by introducing some restrictions in the forms of quotas for four sensitive products and 
defining the rules of origin criteria.  A comprehe nsive review and revision of the trade treaty was 
done in 2009 which will remain valid till 2016.  Besides, with the objective of expanding and 
diversifying trade, Nepal has signed bilateral trad e agreements with China, Bangladesh, Sri Lanka, 
Pakistan, the United Kingdom, the United States, DP R Korea, Republic of Korea, Egypt, Mongolia, 
and Romania.  
5.2 Regional 
52. Nepal has joined two regional agreements – Agreement on S outh Asian Free Trade Area 
(SAFTA) and Framework Agreement on the BIMST-EC  (Bay of Bengal Initiative for Multi-Sectoral, 
Technical and Economic Cooperation) Free Trade Ar ea in 2004.  The SAFTA Agreement entered into 
force in 2006.  SAFTA members have gradually been  reducing tariff to 0-5% on all tariff lines except 
the sensitive lists as per the trad e liberalization program (TLP) of the Agreement.  The SAFTA shall 
be fully implemented by 1 January 2016.  There are, however, a number of constraints in 
implementing the SAFTA that include large size of se nsitive list, non-tariff barriers, and the prospect 
of 'spaghetti bowl' effect due to multiplicity of agreements among the same member countries.  
Further reforms should be undertaken and the impl ementation process should be expedited.  Recently, 
SAARC Agreement on Trade in Services (SAT IS) has been signed by SAARC members. 
Negotiations on schedule of specific commitments under this Agreement have been started.  
Similarly, negotiations are taking place among the BIMSTEC FTA members in the areas of tariff concessions, customs cooperation, services and inv estments albeit with slow progress under this 
Agreement.  
53. Hence, joining regional blocs in the region, on the one hand, is expected to promote regional 
trade by improving complementarities within the regi on and, on the other, correct the traditional lack 
of commonality among the countries in the region.  WT/TPR/G/257 Trade Policy Review 
Page 20 
  
 5.3 Multilateral 
 5.3.1 World Trade Organization and Nepal 
 54. Nepal applied for the membership of GATT in  1989.  Nepal finally acceded to WTO in 
April 2004 through a strenuous accession process.  It became the first LDC member to accede to 
WTO through the accession process.  Nepal is an active participant in WTO negotiations.  It participates mainly in NAMA, Agriculture, Serv ices, TRIPS, Trade Facilitation, Sub-committee on 
Least Developed Countries, S&D treatment and SPS ne gotiations.  Mostly, Nepal raises issues related 
to LDCs and works in the LDCs group fo r positions to be taken by the group. 
55. However, Nepal's participation in the WTO negotiations is severely handicapped by its 
limited human resources, institutional capacity, fi nancial resources and understanding of complex 
dynamics of multilateral trade regime.  The problem  of capacity constraints has compounding effects 
on international trade negotiations and benefits that would come from Nepal's membership in the 
WTO.  
56. Nepal is a beneficiary of WTO technical assist ance.  WTO has supported Nepal to enhance its 
human and institutional capacities.  Other important  technical and financial assistance need to be 
enhanced through EIF and STDF.   
57. In the process of accession, Nepal had made several commitments, of which many have 
already been implemented.  For the remaining, th ough fully committed to implement, it intends to do 
so gradually and prudently in due course of time so that they do not hurt Nepal's already weak and 
vulnerable economy.  In this process, MOCS has la unched a project to implement the remaining WTO 
commitments.  The Ministry has formed a committe e of focal points representing concerned agencies 
and other stakeholders to support and over see implementation of WTO commitments.  
58. However, it will be useful to make a note of caution that despite the good intention of the 
Government of Nepal, because of the factors like poor technical, human and financial capacities;  
rampant poverty and unemployment;  and weak national economy, all of the WTO commitments 
cannot be implemented by the Government alone and immediately.  The implementation requires 
reasonable timeframe and the DPs must support it with the sufficient technical and financial 
assistances. 
5.3.2 Aid for Trade and EIF 
 
59. Nepal was an active participant in the mee tings held to develop both the IF and EIF 
mechanisms.  It is playing an active role in the pr esent activities of EIF.  Currently, it is one of the EIF 
board members and as a board member, it is concentr ating and consolidating its efforts to strengthen 
the efficiency and scope of EIF.   
60. Nepal is trying its best to maximize the utiliza tion of trade related foreign assistance.  In this 
regard, with the assistance of EIF, Nepal has est ablished a National Implementation Unit (NIU) in the 
Ministry of Commerce and Supplies.  Several progr ams have been launched under EIF Tier 1 project 
to develop the capacity of NIU.  Similarly, Nepa l Trade Integration Study also has been conducted 
under this program.  In the same way, some Tier 2 projects have been prepared and approval process 
is undergoing.  Some other programs have already been started to develop the capacity of NIU, 
MOCS, and the Focal Points of various trade relate d agencies.  They are also supporting to develop 
some specific products as recommended by NTIS.  Nepal with the close coordination of DPs has Nepal WT/TPR/G/257 
 Page 21 
 
 
 formed a donors' coordination committee and currently  GIZ has assumed the role of Donor Facilitator 
(DF).  In addition, MOCS is pushing very hard to  establish a Trade Trust Fund in order to mobilize 
funds to implement NTIS 2010 and carry out tr ade facilitation and reforms, undertake capacity 
building measures and product develo pment projects in a coordinate d and coherent way.  Several 
committees and subcommittees have been established to  monitor and supervise the implementation of 
TRTA at the expert level and senior official level.  In this regard, the apex body, National Steering 
Committee, has been constituted under the chairmansh ip of the Chief Secretary of the Government 
comprising the Secretaries of the concerned Ministries and representatives from private sector as members.  In the meantime, the DP s are also coming forward to support the Government in its efforts.  
Several projects have already been launched and some more are in the pipeline.  Nonetheless, 
considering the sorry state of trad e, these activities are highly inadequate  to say the least.  Nepal needs 
more immediate support from its DPs to address problems directly related to trade and production.  The most urgent support is required in the infrastructure sector such as energy and transportation.  
61. In this context, there is a need for further discussion about the efficiency and sufficiency of 
EIF and AfT mechanisms to meet the needs of gr owing demand of LDCs for resources.  The support 
provided by EIF is miniscule compared to the needs of LDCs, like Nepal.  In addition, the long and 
cumbersome process of EIF is also a matter of concern.  In the same way, the multilateral structure of AfT mechanism has almost lost its meaning for LD Cs.  There is no direct relation between AFT and 
EIF except the publication of biannual monitoring report by WTO.  When the AFT concept was introduced, it was explained that EIF and AFT mechan isms will work closely in LDCs.  At that time, 
EIF was defined as the vehicle for AFT.  But at th e ground level, no direct relation between them is 
visible and both processes are working independen tly, EIF multilaterally and AFT bilaterally.  
Therefore, there is an urgent need to develop a direct link between EIF and AFT so that the projects developed by EIF but beyond its tec hnical and financial capacity and scope (which is very limited) 
could be implemented through AFT mechanism.  In  the meantime, consideri ng the specific needs of 
countries like Nepal, AFT should also allocate res ources in infrastructure projects.  However, the 
funding allocated for basic infrastructure, MDGs should not be diverted to aid for trade.  Rather, there 
should be additionality, predictability and transp arency in the aid for trade mechanism.   
62. Lastly, there should be coordinated joint efforts from both sides, the recipients and donors, to 
provide the required appropriate technology and financial assistance with full respect to all 
internationally agreed principles of foreign assistan ce including Paris Principles and Accra Agenda of 
Actions.  In our experience, demand driven and di rect budgetary support are most effective ways for 
the optimum utilization of foreign assistance.  In this process, transparency and accountability should 
be properly established by both recipients and donors.  
5.3.3 Nepal in Informal Consultative Group of LDCs within WTO 
 63. The needs for preferential market access and commensurate technical and financial assistance 
and capacity building to LDCs are recognized all over the world.  Till now, almost two-third of the LDCs are members of WTO.  However, due to ve ry small size of their economy and insignificant 
political influence, these countries individually canno t exert pressure on the ongoing multilateral trade 
negotiations at WTO.  Nepal is one of the very active members of this group and, in addition to 
protecting its own interest within the group, works in the group to develop common positions on 
several negotiating issues.  
64. Moreover, in the ongoing negotia tions in Doha Round, several concessions and exemptions 
are provisioned under the NAMA, Services, Agriculture, and Trade Facilitation, NTBs, SPS modalities and S & D treatment for LDCs.  Most of these provisions are almost established as there is WT/TPR/G/257 Trade Policy Review 
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 no voice of opposition raised against these provisi ons during ongoing negotiations.  Only when the 
Doha Round concludes, these provisions will be approved.  Nevertheless, in the present global 
economic scenario suffering from turmoil and uncer tainty due to recurring multiple global crises, 
when none of the major players are ready to co mpromise, there is little possibility of successful 
conclusion of Doha Round in the near future.  It may create crisis of confidence on  the multilateral 
trading system itself.  It will also generate strong pessimism among the stakeholders which, as a result, will further deteriorate the present worsening global economy.  
65. In addition, since  the LDCs are in a very difficult situation, in particular, due to these global 
crises for which they have made hardly any contri bution, they may not be in a position to overcome 
the vulnerabilities created by these crises.  There is gr eater risk that if the problems of LDCs are not 
addressed immediately by providing necessary fi nancial and technical assistance and improving 
market access, whatever they have achieved during th e last decade may be lost and they may fall prey 
to another round of vicious circle of poverty and unemployment trap.  In order to escape such an 
outcome the LDCs need immediate and tangible support.  
66. In this backdrop, if the WTO approves those more or less agreed provisions under different 
negotiating texts, for LDCs as its minimum agenda, it will support LDCs to sustain the development 
they have achieved in previous years as well as it will significantly boost faith in multi-lateral trading 
regime.  It will regenerate the global confidence th at WTO is an inclusive organization which cares 
the poorest and vulnerable countries.  Keeping in  view all these prospects, the Government has 
worked together with the LDC group in Geneva  to create consensus among the WTO Members to 
approve LDCs specific provisions as Early Harvesting.  
6. Constraints 
 6.1 Long Political Transition 
 
67. Nepal experienced serious political instability par ticularly after the mid-term election in 1994, 
which was further compounded by the decade long arme d conflict and taking over of the power by the 
king.  Even after the election of the Constituent Assembly and the declaration of the country as a 
federal republic in 2008, political transition is taki ng longer time than expected.  Even with the 
pressing tasks on political front to conclude the peace  process to a positive conclusion and writing of a 
new constitution through the elected Constituent Assembly, Nepal has continued with liberal 
economic policy reforms and put in place far reaching policy/institutional measures in compliance 
with its commitments to WTO provisions.   Problems like general strikes, extortion, intimidation, 
hurdles in the movements of goods and services o ccurred frequently.  Consequently, development 
issues could not get proper attention at the desired level.  
6.2 Difficult Terrain 
 
68. Most of Nepal's terrain is very difficult, esp ecially due to geo-physical features of high 
mountains and hills.  It is detrimen tal to develop infrastructure.  Most of the land is not arable and 
therefore not suitable for commercial farming.  Th ese factors add to the cost of production and make 
trade less competitive.  Because of the extremely diffic ult terrain in the northern border, Nepal's trade 
with its northern neighbor, the People's Republic of China, which is a fast growing and the second 
largest economy in the world, is relatively low.  Di fficult terrain, thus, is a major hindrance in creating 
basic infrastructure, and promoting production and trade. Nepal WT/TPR/G/257 
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 6.3 Geographical Location 
 
69. Nepal, being a land-locked country includes hi gh transit cost which is a big challenge to 
promote trade.  The remote distance from sea port is another major hurdle in the trade and transit of 
Nepal, the nearest sea port being 660 miles away from the Nepalese border.  It is compounded by 
transit and trade facilitation problems that add signifi cant costs in the interna tional trade in the forms 
of additional service charges and undue delays.  These difficulties make the export of Nepalese goods 
expensive in comparison to other countries.  
6.4 Limited Export Basket 
 
70. Nepal's trade basket is very limited covering ar ound 40% of total export by major ten items.  
In addition, the trend of export is also very vola tile.  Exports have largely been unattainable due to 
unpredictable behavior of importers, decline in the quality of products, absenc e of effective branding 
and other issues, relating to the protection of inte llectual property rights, inability of exporters to 
generate competitive advantage, increased cost  of production, and hi gh competition from other 
exporters as well.   
6.5 Weak Labor Relations 
 
71. In addition to political instability and also as an outcome of it, the relations between laborers 
and employers are not satisfactory as manifested in increasing disputes between management and 
laborers.  In the last 15 years or so, the number of labor strikes, locks-outs, and industrial shut downs 
have increased.  Many of these actions were political ly instigated requiring political solutions.  The 
recent agreement at the aegis of the government is  expected to improve the situation significantly. 
6.6 Inadequate Economic Infrastructure 
 
72. The present performance of Nepalese economy and tr ade is affected by weak infrastructure, 
in particular lack of energy and road infrastructur e.  At present, Nepal is facing severe energy crisis, 
despite having abundant  water resources .  The big gap between suppl y and demand of electricity, 
especially in the dry season, has created frequent  and long-time power cuts which has reduced 
production, increased cost and created uncertainty ov er smooth supply of products to the market.  All 
these factors are making Nepalese products less competitive.  
73. Similarly, inadequate as well as low quality road in frastructure, especially  rural roads, has hit 
national economy from both demand and supply side.  On  the demand side, in the absence of roads, 
the products of one part of the country cannot be  supplied to other parts where there are demands.  
This reduces market size.  On the supply side, raw materials and agricultural and intermediate 
products available in one part of the country cannot be supplied to the further value chains located in 
other parts.  It, on the one hand, affects the quantit y and quality of the final products and, on the other 
hand, increases cost of production due to the u se of expensive imported raw materials and 
intermediate products while the raw materials availabl e within the country go wasted.  In addition, the 
technologies used in the production and trade are not very advanced and cost efficient.  There is 
limited use of ICT.  The outdated technology causes add itional costs directly or indirectly.  Similarly, 
port infrastructure in the nearest seaports for Nepa l poses several constraints relating to procedural 
hurdle, delays and high cost.   WT/TPR/G/257 Trade Policy Review 
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 6.7 Inadequate Social Infrastructure 
 
74. Poor social infrastructure also hinders growth of economy as well as trade.  Poor nutritional 
undertaking, low life expectancy, high cost and low quality of medical treatment especially for poor 
people, insufficiency and low quality of government educational and vocational training institutions, 
insufficient and expensive private educational and vocational institutions, and mass illiteracy are some 
of the major hurdles that handicap the productivity and efficiency of production, thereby making trade less competitive.  
6.8 Insufficient Skilled Human Resources 
 
75. One of the important problems of Nepale se economy is the absence of high quality, 
professional human resources in all sectors including trade.  Most of the producers and traders lack vision and long term planning.  They are not hi ghly skilled and technically sound to use modern 
technology in their businesses including ICTs.  The hi gh level government offi cials and technocrats 
dealing with the trade and investment issues also lack sufficient experience and expertise in the 
related sector due to absence of mechanism to develop specialized human resources.  Various factors 
including the lack of opportunities for upgrading their expertise and professionalism contribute to low productivity, delay and poor handling, u ltimately leading to additional costs. 
6.9 Inadequate TBT and SPS Infrastructure 
 76. Lack of internationally recognized standard cer tification mechanism is a serious problem in 
the growth of trade.  In the absence of such mechanism, even though concessional market access has 
been provided by many trading partners, Nepal has not been able to utilize them properly by 
expanding its export, especially of agricultural and fo restry products.  There is an example of Nepal 
losing its well established honey market in Norway as it could not submit internationally recognized 
residue free certificates.  In many other market s including India, Nepal is facing such problems 
frequently.  However, one laboratory in private sector has recently been accredited and awarded 
ISO/IEC 17025 by National Accreditation Board for Calibration and Testing Laboratories (NABL) of India for chemical analysis, which is a step ahead  in developing reliable analytical services in the 
country.  Now, the exporting industries need not depend on laboratories outside the country for chemical analysis needed for export.  In the sa me way, the government standard institutions, NBSM 
and DFTQC have also applied for accreditation on  ISO/IEC17025 to NABL which is in a very 
advanced stage.  
6.10 Inadequate Market Information 
 
77. In the absence of efficient communication networks and well equipped facilities, ICT 
infrastructure in particular, and highly skille d and  professional human resources both among the 
entrepreneurs and employees of the business enterpri ses, it has been difficult  to achieve sufficient 
information on potential market, potential importers a nd their specialties, type of demand, the quantity 
and quality of products demanded, pr oduct packaging, delivery time, co st of delivery, insurance, SPS 
and TBT requirements and the link agencies.  These are very important factors which contribute 
significantly to expand trade.  In the absence of these facilities, Nepal has been unable to properly 
utilize the internationally available trading opportunities.  Nepal WT/TPR/G/257 
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 6.11 Inadequate Trade Related Assistance 
 
78. Aid for trade is still at a very low level.  Only a few development partners have shown 
enthusiasm to come forward to meet Nepal's need s for technological and financial resources.  Nepal 
needs to develop major trade infrastructure to f acilitate trade.  This would require significant 
investments which the Government alone will not be able to bear on its own.  
7. Way Forward 
 
79. Following economic liberalization and accession to WTO, Nepal introduced a series of 
reform programs towards making its economy more open, transparent, and competitive.  Despite 
various initiatives taken by the Government, neither  the economy of Nepal is getting momentum nor 
has its export increased as intended.  The trade deficit is sharply widening over the years.  
80. The Government strongly believes in the principl e that trade should be driven by the private 
sector with the government role limited to facilitation and regulation.  However, there is a need to 
further strengthening broad based economic reforms including those in the trade sector.  In this 
regard, the Government has continued to reform the trade related legal infrastructure further, as well 
as to develop its institutional capacity including th e human resources, so that it could cope with 
rapidly changing structure of international trade.   
81. Presently, the most serious challenge to the G overnment is to lead the peace and constitution 
making processes towards a successful conclusion at the earliest to ensure political stability.  The 
Government has incessantly put all its efforts to face this challenge and, as a result, improvements are 
being noticed.  A lot more has to be done, in this respect, to improve the current economic situation to 
sustain the historic democratic transformation in the country. 
82. The Government has also made several efforts to improve the relations between laborers and 
employers, as it is emerging to be a serious problem.  Recently, it has succeeded in finding consensus among both trade unions and employers in fixing minimum wages of workers, introducing no work 
no pay principles and sustaining industrial peace in which they agree not to call strikes for the next 
four years.  In order to implement the agreed provi sions and to make many ot her required reforms, the 
Government has planned to launch a Labor Reform Package.  In the same way, the Government is 
also trying to approve and implement some additiona l social and family welfare scheme for laborers.  
83. Recognizing the fact that the absence of infrastruct ure, in particular roads and energy, is the 
most pertinent problem of Nepalese economy an d trade, the Government has been putting high 
emphasis since long on the development of infrastructure.   For the last several years, a large portion of 
the budget allocation has been apportioned to different types of infrastructure, especially to roads and 
energy.  Several infrastructure projects, mainly in road sector are being developed and implemented.  
A Road Board has been establishe d to formulate, oversee and coor dinate the Government programs 
for the development of roads.  A mid-hill national hi ghway linking east to west is under construction.  
A fast track road project between Kathmandu and Nijgadh is under progress.  The Government of 
India is supporting to build a postal road from east to west in the southern part of Terai .  Realizing the 
importance of railway infrastructure, the Governme nt has started to look into the possibility of 
developing railway transport in the country.  The Government has taken some initiations to build 
east-west electric railway parallel to the east west highway.  The Government has recently established 
Railway Department under Ministry of Physical Pla nning and Works.  Similarly, the Government has 
taken several measures to develop energy.  In this way, though significant initiatives have been taken 
in the infrastructure sector, it is not at satisfactory level at present;  especially lack of energy has WT/TPR/G/257 Trade Policy Review 
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 created massive dissatisfaction among the business comm unity and general public.  So with the view 
to improve the situation, the Government has to adopt measures to intensify and implement the above 
programs and develop strategies to address the problems. 
84. There is also a need to expand and improve  market access through strong bilateral and 
multilateral negotiations.  Least developed countries (L DCs) have been recognized as "the poorest and 
weakest segment of the international community " and countries in special difficulties by the 
United Nations and the WTO.  Hence, they are suppo sed to get special treatment in their trade from 
the developed and other developing countries in terms of market access and capacity development.  In 
this regard, Nepal is working together with fello w LDCs in the international forums to utilize the 
opportunities under the Special and Differential treatment.  In this context, to identify national needs 
and thereby determine national pos itions, and properly coordinate am ong the stakeholders and guide 
the missions abroad which will negotiate with bila teral and multilateral counter parts, Nepal has taken 
several measures to strengthen its capacity in te rms of both quality and quantity of its human 
resources in its diplomatic missions abroad and in the agencies inside the country, particularly in 
MOCS, MOI, MOAC, MOFA, MOF and other agen cies of the Government and private sector 
involved in analysing trade situation and in trade ne gotiations.  The logistics in these agencies are also 
insufficient and need to be commensurately increas ed.  It is providing national and international 
training to many trade officials.  It has planned to  intensify such activities in future also.  It has 
decided to establish a Trade Policy Analysis Wing  under MOCS and to reform and strengthen the 
TEPC.  Both the activities are under implementation.  In addition, the Government has initiated to 
increase human resource in its diplomatic missions abroad and has prioritized economic diplomacy 
that focuses on trade promotion theme as developmen t multiplier.  In order to expand regional and 
international markets, it has given high priority  to the membership of different regional and 
multilateral trade groupings.  
85. The present WTO rules and regulations are alre ady being implemented.  Negotiations are 
continued for further improvements in it.  Similarl y, SAFTA Agreement also has been implemented.  
But due to various reasons it has not been very e ffective.  The BIMSTEC negotiation is undergoing.  
Nepal also intends to participate in APTA.  In a ddition to bilateral trade ag reements, many developed 
and developing countries have provided several concessional market accesses to LDCs under GSP by 
developed countries, GSTP by developing countr ies and Duty Free Quota Free Market Access 
provisions by both developed a nd developing countries, which s hould be properly identified and 
studied, and the study recommendations should be implemented accordingly. 
86. In principle, the Government has also given high priority to economic diplomacy.  However, 
it has not been very effective.  Efforts are under way to  implement it in a more aggressive and focused 
way.  The Government is committed to further strengthen the collaborati on and coordination with 
private sector.  Market research is another area of lacking.  The TEPC and the proposed TPAW 
should be constructively engaged in this endeavor.  In this regard, the Government remains committed 
to coordinate with the private sector, particularly  the product associations, and its diplomatic missions 
abroad to develop an internati onal market information center. 
87. Presently, the global economy, in particular th e LDCs, due to the frequent multiple crises 
such as food, financial, energy and debt, ar e facing multipronged problems.  LDCs are the double 
victims of these crises as they have to, first, struggl e to at least sustain the past achievements and, 
second, move their development process forward to the extent possible.  For this to happen, they need 
an immediate financial, technical and market acces s support.  In this backdrop, the Government in 
close cooperation with LDCs Group in Geneva has been seeking the immediate operationalization of 
all the LDCs specific provisions as documented in  the various ongoing WTO negotiations, such as Nepal WT/TPR/G/257 
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 NAMA, Agriculture, TRIPS, Services, Trade Facilitati on and S&D Treatment as Early Harvesting.  In 
this regard, the recent approval by the 8th WTO Ministerial of services waiver and extension of TRIPS 
implementation obligation for LDCs are positive steps.  Nepal will continue its effort in this direction 
in the future too. 
88. Another serious limitation is the weak conf ormity assessment infrastructure and quality 
infrastructure in the country.  There are some in itial level laboratories which are in the process of 
getting formally recognized by any of the existing international standardization mechanisms and are 
incapable of issuing such certification. In order to  solve this problem, the Government has adopted 
three track approaches.  In the first track it is upgr ading the currently available laboratories with the 
assistance of DPs and is also building five new laboratories in the most important custom points in 
Indian border under Department of Customs.  Sim ilarly, in the second track, it has initiated process 
for getting recognition for the existing national sta ndard institutions, i.e. NBSM and DFTQC by the 
Indian standardization institutions which is in a ve ry advanced stage.  A private pharmaceuticals lab 
has already received recognition from NABL.  In th e third track, it has take n initiative to enact an 
Accreditation Act which is in the parliament for approval.  Once the accreditation board is formally 
established under the act, it will facilitate the proc ess for getting international recognition from the 
international standard instituti ons.  After it is recognized, the Board will start accrediting local 
laboratories which will clear the way for local labor atories to issue standard certificate to local 
products.  This is expected to address a critical problem  that national export trade is currently facing.   
8. Conclusion 
 
89. Trade is a means to fasten economic growth and alleviate poverty by providing employment 
and livelihood opportunities.  Therefore, it has taken tr ade as an effective tool  to reduce abject poverty 
in the country and to enhance the well being of th e marginalized people.  With this conviction, the 
Government has accorded high emphasis to trade an d has mainstreamed trade into its development 
plans and programs.  
90. At the same time, the Government firmly believ es that the real promotion of sustainable trade 
can be achieved through efficiency, quality and co mpetitiveness.  Accordingly, the Government, in 
the last two decades, has taken several measure s to liberalize and open up trade and make it 
competitive.  The membership of the WTO is a mil estone towards this end and, during and after the 
accession to WTO, the process of liberalization was fu rther intensified.  The Government is fully 
committed to implement its WTO commitments.  The Government further believes that the private 
sector is the real player of trade and the Government's  role is to regulate, facilitate and expand trade in 
international markets by effective bilateral and multilateral trade negotiations.  The Government also 
supports the private sector in enhancing their capacity by providing assi stance to increase their 
productivity, efficiency and competitiveness.  In order to liberalize the economy and make it private 
sector friendly, it has amended the existing laws a nd introduced new laws and regulations as required 
in a timely manner.  Similarly, it has prom ulgated new economic policies including trade and 
industrial policies, considering the changed context of globalization and liberalization.  It has tried to 
promote private sector investors, both domestic an d foreign, by providing them various incentives 
through the new Industrial Policy 2010, Board of Investments Act 2011 and other investment related 
policies and agreements like BI PPA and double taxation avoidance ag reement.  The Government has 
taken several initiatives to remove supply side constraints and to  diversify and increase the size of 
export basket. 
91. The Trade Policy 2009 and NTIS 2010 are important instruments which have precisely 
identified the requirements for the promotion of trad e and prescribed the list of actions needed to be WT/TPR/G/257 Trade Policy Review 
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 undertaken in this regard.  The Government and the DP s need to come together and jointly act in close 
coordination to implement all the suggestions ma de by these two policy documents.  The Government 
has officially adopted NTIS as the midterm nationa l trade strategy and has started implementing it.  
However, the Government does not have sufficient resources to implement all of them on its own.  
So, the DPs are expected to extend their support in a coordinated and coherent manner to fully 
implement the identified program.  Some DPs ha ve shown their interest and have started 
implementing some projects from NTIS.  
92. The Government has also initiated efforts to  build capacity both within the Government 
agencies and in the private sector.  National Im plementation Unit (NIU) has been established in 
MOCS within the framework of EIF with an objec tive of developing it as a fully capable unit and 
thereby facilitating national capac ity building.  The NIU will be engaged in preparing and 
implementation of EIF Tier one and Tier two project s including capacity development.  It will also 
monitor the implementation of selected projects. 
93. In the same way, there are a number of constraints creating hurdles in the growth of trade, 
such as inadequate basic infrastructur e:  energy, standardized laboratories and transport infrastructure.  
To meet the requirements, the Government and DPs should come together through aid for trade 
process or other appropriate bilateral and multilatera l processes to develop requisite infrastructures 
and avail facilities of standardized laboratories.  Such assistance should adhere to the principles of 
Paris Declaration 2005 and Accra Ag enda for Actions 2008.  There is a need to strengthen country's 
ownership by following demand driven process and enhancing direct budgetary support while 
ensuring full transparency and accountability of recipients.   
94. Nepal considers rule based and non-discriminato ry 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 
join the Organization through the accession process, a ttaches great importance to the functioning of 
the World Trade Organization.  It has made best efforts to implement commitments and to accelerate 
legal reform and human resour ce development in compliance with WTO provisions.  The 
Government of Nepal is striving to foster and s upport a vigorous and competitive private sector and to 
develop Nepal as an attractive destination for trade and investment.  Nepal's participation at the WTO 
ministerial conferences at the highest level is something that also demonstrates the high level of commitment to the multilateral trading process.  Toda y the country stands at a crucial juncture of 
political transformation and alongside, much need ed socio-economic transformation.  Economic 
agenda has a great bearing on the success of po litical 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 WT/TPR/G/257 
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 9. Acronym 
  
AfT : Aid for Trade APP : Agricultural Perspective Plan APTA : Asia Pacific Trade Agreement ASYCUDA : Automated System for Customs Data BIPPA : Bilateral Investment Pr omotion and Protection Agreement 
DDCs : District Development Committees DF : Development Facilitator DPs : Development Partners DTIS : Diagnostic Trade Integration Study EIF : Enhanced Integrated Framework FDI : Foreign Direct Investment GATT : General Agreement on Tariff and Trade GSP : General System of Preferences GSTP : Global System of Trading Preferences ICTs : Information and Communication Technologies IF : Integrated Framework IMF : International Monetary Fund ITC : International Trade Center LDCs : Least Developed Countries LLDCs : Landlocked Least Developed Countries MOCS : Ministry of Commerce and Supplies MOFA : Ministry of Foreign Affairs MOF : Ministry of Finance MOI : Ministry of Industry NABL : National Accreditation Board for Calibration and Testing Laboratories 
NAMA : Non-Agricultural Market Access NRs : Nepalese Rupees NTBs : Non-Trade Barriers NTIS : Nepal Trade Integrated Strategy 2010 R & D : Research and Development S & D : Special and Differential Treatment SPS : Sanitary and Phyto-sanitary  STDF : Standards and Trade Development Facility (STDF) TBT : Technical Barriers to Trade TEPC : Trade and Economic Promotion Center TRIPS : Trade Related Intellectual Property Rights TRTA : Trade Related Technical Assistance UNCTAD : United Nations Center for Trade and Development VAT : Value Added Tax VDCs : Village Development Committees WT/TPR/G/257 Trade Policy Review 
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 WB : World Bank 
WIPO : World Intellectual Property Organization WTO : World Trade Organization 
   
__________