“Nepal has to explore opportunities by keeping neighbouring Indian states in mind”

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“Nepal has to explore opportunities by keeping neighbouring Indian states in mind”

Dr Rajeev Singh 
Director General, Indian Chambers of Commerce (ICC)

Despite the historic relationship between Nepal and India, the two countries often face obstacles and impediments when it comes to bilateral trade and investment. Various tariff and non-tariff barriers have been identified but little has been done to resolve the issues. Dr Rajeev Singh, Director General of Indian Chambers of Commerce (ICC) was recently in Nepal for the Mini India Show 2016 which was held in Kathmandu from March 17-21. Sponsored by the Ministry of Commerce, Government of India, the three day conference was attended by 80 Indian companies representing various products and services. The main objective of the programme was to develop business linkages and strengthen trade relations between Nepal and India. In an interview with Editor-in-Chief of NewBiz Madan Lamsal, Dr Singh talked about investment opportunities in Nepal, trade relations between the two countries and the obstacles in Nepal-India trade. Excerpts:

What brings you to Nepal this time?
We are in Nepal for the 'Mini India Show 2016’, a three day conference, exhibition and buyer-seller meet under the aegis of the Ministry of Commerce, Government of India. We have 80 companies representing various ranges of products and services. The Idea of the event is to strengthen business linkages, trade and more importantly long term connection with the Nepali market. That’s why we have brought companies that are not only in the consumer goods business, but are also involved in business goods and services.

What has been the experience so far? Have you got any joint ventures?
Consumer goods are receiving a very good response. Business goods and services have also received a warm response, except for a few who are yet to find business partners. Overall, the response has been very positive for the Indian companies. 

How do such events facilitate the bilateral trade between Nepal and India?
Many Indian companies who are already here are looking at business partners and associates. Some companies are even willing to explore investment opportunities in Nepal. This will strengthen business ties between the two countries. Enhancing business is important because it will boost the bilateral trade between Nepal and India.

What role has the Indian Chambers of Commerce (ICC) played in strengthening Nepal-India trade?
Our role is to coordinate and bring the companies of both countries together and to also facilitate tourism in India and Nepal. Overall, ICC has been very active in South Asia and we had led different missions to various countries including Bangladesh, Nepal, Bhutan and Sri lanka and other Asian countries. We are also very active in South-East Asia. Especially in Nepal, our focus has been to explore business opportunities here. Similarly, we are also focusing on tariff or non-tariff barriers in bilateral trade.

What investment opportunities do you see in Nepal for Indian investors?
Nepal has huge hydropower potential. We always refer to the model which Bhutan has adopted. Half of Bhutan’s GDP is from power sales to India. However, we are not recommending that Nepal should follow what Bhutan has done. 

Nepal can generate significant amounts of electricity which can be supplied to India. India can become a major export market for Nepali electricity. By exporting hydroelectricity, Nepal can generate income to fund the development of infrastructures, connectivity and employment creation. 

What do you think are the impediments in the way?
There are issues on the ground in terms of the support from the people and the communities. We have been hearing about various disturbances. Any investor who is willing to invest needs support from the community, political parties alongside strong commitment and willingness from the country's government.

What strategies should the Nepal government and Nepali private sector adopt regarding the global promotion of investment opportunities?
In addition to hydropower, there are two sectors Nepal can do extremely well in. One is tourism, which after last year’s earthquake has taken some beating but it is recovering fast. Another sector is agro, food and herbs. Agro, food and herbs have a huge impact on farmers. This would mean prosperity, jobs for people who are below the poverty line and struggling to earn enough income.

The number of Indian companies investing in Nepal has sharply declined over the last 10 years. Why is that? Are they not interested in investing here anymore? Is India enough for them?
There are some factors affecting investment in Nepal. Firstly, India has huge opportunities for investors. India has a large vibrant middle class which offers a very attractive market to investors. Secondly, it is not that Indian companies are not investing abroad. There are good investments which are happening elsewhere. 

In today's competitive world each country has to compete and when investors look for investments, they look into comparative advantages. Nepal also has to look at some of the issues. One of the issues is the strong commitment and support from the government for the larger projects. 

Second is the ease of doing business, which the country has to improve in order to attract investment. I think it is also in the interest of Nepal to offer a package to investors. Nepal can benefit from the neighbouring markets of Bihar, Uttar Pradesh and other nearby Indian states as its domestic market is not very big. The country needs to identify products and services that can be produced here and exported to India. I would like to mention that even in India, all the states are competing very hard. Similarly, international companies are also competing for the same market in India. Likewise, India has very good connectivity which again becomes a challenge for Nepal as the country is landlocked. Nepal has to explore opportunities by also keeping neighbouring Indian states in mind and look at projects that appeal to Indian investors and work in a focused manner. 

Similarly, stability in policies is another area Indian investors are looking into. Nepal needs to ensure investors with policy stability that will not change with political parties or any new government, rather than forming new policies. 

What could be the package?
One option can be the single window policy. In India, one government agency deals with the investors and clearances are given at one place. I think policies here are fair enough. There might be minor issues relating to procedures and policies. These issues can be resolved if the government has strong willingness and commitment to support Indian investors.

Many Nepali businesses often complain about the various non-tariff barriers when they try to sell their products and services in India. How can we resolve this issue?
The chambers on both sides need to work closely and engage regularly with the governments of the two countries to resolve this issue. Similar issues were faced by Bangladesh almost five-six years back. ICC along with the Federation of Indian Chambers of Commerce and Industry (FICCI) worked closely with their Bangladeshi counterparts to solve the problem. Today the situation is far better than what it was. 

A similar model can be followed for Nepal. The chambers should engage more, work closely with the government, identify specific non-tariff barriers and bring out practical and actionable ideas to resolve the issue. I am sure that the Indian government and the Indian embassy here is very keen to help resolve the issues and strengthen relations with Nepal. 

What is your view regarding the ever increasing trade gap between Nepal and India?
If Nepal starts supplying electricity to India, the trade gap will reverse. The same has happened in the case of Bhutan. By exporting electricity, the trade deficit will be on the Indian side, not on the Nepal side. 

How can Nepal-India trade and investment relations be strengthened?
The two countries have a centuries- old relationship. Our fortune, growth and prosperity are tied together. So there is a need for Nepal and India to further deepen the relationship, try to address the irritants which are well known and explore investment opportunities together. 

Hydropower can be a good start in this. Some Indian companies are already involved in hydropower development in Nepal which is a positive step towards enhancing the relationship of the two countries. 

Tourism can also help to boost trade ties between Nepal and India. Buddhist tourism, especially, can be beneficial to the tour operators from both sides. The two countries can mutually benefit if they can jointly market tourism in nations such as Myanmar, Cambodia, Thailand, Japan, and Laos. A joint package can be worked out for the purpose. Similarly, joint ventures in agro, food and herbs can strengthen the relationship. India can help the small entrepreneurs involved in the sector with training, capacity building, providing the market linkages and certifications. Since Nepal has most of its land connectivity with India, in terms of logistics and supply chain the partnership could be very much helpful. 

Similarly, regular dialogue between the chambers, businesses, governments and even small and medium enterprises is extremely important to strengthen the trade relationship between the two countries.

While the talks on the economic integration of SAARC countries have stretched on for a long time, nothing is moving. How do you view the progress of economic integration in SAARC?
SAARC definitely has issues and the organisation has not been able to make any impact. But what ICC sees as very important is the Motor Vehicles Agreement between the BBIN countries (Bangladesh, Bhutan, India and Nepal), which is the sub-group of SAARC. The procedure part of the deal has been drafted and vetted by the ministries of transport of the four nations. Once the agreement is in place, the region will be integrated and there will be free flow of goods and people. This is really going to make a huge impact because Nepal will be able to access the markets of Bangladesh and Bhutan seamlessly. 

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