Causes of Erratic Trends in Nepal's Exports

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Causes of Erratic Trends in Nepal's Exports

The government should focus on overseas markets where Nepali products may have some comparative advantage.


The main objective of the Trade Promotion Center established in the year 1970 was to increase Nepali exports to overseas markets. The objective was set after a realisation that Nepal lacked products with a comparative advantage that can be exported to India. It is true that big cardamom that grows in eastern districts of Nepal can be produced in abundance also in Sikkim across the border. Likewise, tea and ginger that are produced in the eastern districts can also be grown in Darjeeling district of India.

Woollen carpets of the Tibetan variety are also widely woven in the Ladakh region of India. The medicinal and aromatic herbs collected in the Karnali region of Nepal are available in abundant quantities also in Uttarakhand, Himachal Pradesh and Jammu and Kashmir regions of India.

In the case of processed and manufactured products, the economy of scale prevails over other factors and thus it is almost impossible to compete with Indian products.  Until the 1970s, Tibet was like a captive market for a number of Nepali agricultural and manufacturing products. But the astonishing development that Tibet achieved since then in the agricultural and manufacturing sectors and the connectivity that developed between Tibet and mainland China practically wiped out all the advantages that Nepal had in the Tibetan market.  

But Nepal is still trying, in vain, to increase exports to India and China by increasing exports of products in which Nepal lacks a comparative advantage. Vegetable ghee, acrylic yarn, zinc oxide, copper wire, iron and their products, palm oil, soybean oil, wheat flour, kitchen utensils, pepper and sunflower oil are some of those products.  Some of these items used to be Nepal’s major export commodities to India for different periods briefly.

The temporary circumstances that provided a good opportunity for such products vanished equally fast after the Indian government made some trivial tweaks in its policy. Thus the focus on such products has resulted in an erratic change in the overall export scenario of Nepal.To achieve some steady growth in exports, the public policy should focus on exports to overseas where Nepali products may have some comparative advantage. So the government should follow the strategy adopted in 1970 and give emphasis to promote and expand our overseas market where a vast array of Nepali products have comparative advantage and have shown more resilience.

Readymade garments, woollen pashmina, medicinal herbs, organic certified agricultural products, woollen carpets, handicraft products, handmade paper, woollen felt, and natural fibre products are some of the commodities that have a comparative advantage in overseas markets.Soybean oil, palm oil and sunflower oil emerged as Nepal’s major export commodities in Fiscal Year 2018/19.

Soybean oil export reached its peak in FY 2020/21 before the export value declined to Rs 48.12 billion in the following year. Palm oil too emerged as the major export commodity in the same period but it almost disappeared from the export basket in FY 2020/21. Though it again gained momentum in FY 2021/22, export of all these edible oil varieties has nosedived in the initial months of 2022/23.  

(Bajgain is a Senior Officer with the Trade & Export Promotion Center. The views expressed here are his personal.)

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