Dimensions of Nepal-Portugal Economic Relations

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Dimensions of Nepal-Portugal Economic Relations

BY Krishna Raj Bajgain

Portugal, once a pioneering global explorer and a pivotal player in world trade with important connections between Europe and the wider world, is a member of the European Union. According to the International Monetary Fund, Portugal's gross domestic product (GDP) was approximately $276 billion in 2023 with a purchasing power parity of $466 billion. 

Ranked as the 50th largest economy globally, Portugal experienced a robust economic growth of 6.7% in 2022. The growth rate is expected to stabilise at 1.5% in 2024. The agricultural sector contributes 1.9% to Portugal's economy, while the manufacturing and service industries account for 18.6% and 79.5%, respectively. According to the International Trade Centre, Portugal's total imports in 2022 amounted to approximately $143 billion, whereas exports reached $115 billion.

Nepal and Portugal formally established diplomatic relations on September 1, 1976. Recognizing the increasing significance of Portugal in the Nepali economy and its potential in areas such as employment, bilateral trade, and investment, Nepal has recently appointed a resident ambassador to Portugal. Although Portugal is an important economic power in Europe, bilateral trade between Nepal and Portugal remains relatively low.

Nepali products exported to Portugal can be classified into three categories. The first category comprises traditionally exported goods such as ready-made garments, pashmina shawls, musical instruments, textile articles (including gloves, blankets, and sacks), woollen carpets, woollen felt goods, handicrafts, and ready-made garments. The second category encompasses emerging products such as dog or cat food, and tea. Prepared food items with Nepali flavours, catering to Nepali communities residing in Portugal as consumers, are in the third category. With the growing Nepali diaspora in Portugal, products like chiura (beaten rice), flakes, flour, spices, milk products, mustard oil, dried vegetables, pickles of sesame, Timmur pepper, chilli, chook (lemon concentrate) and silam (perilla seeds), and dry beans have emerged as potential export products for the future.

It is equally important to organise a "Nepal Trade Fair" regularly, specifically targeting the Nepali and South Asian communities residing in Portugal.

Considering Portugal's import capacity and Nepal's export potential, products such as honey, coffee, tea, ginger, herbs, sugar, pasta and dog or cat feed have export potential in Portugal valued at Rs 123 billion. Similarly, woollen felt goods, ready-made garments, footwear, silver jewellery, and Christmas decoration items also hold significant potential in the Portuguese market.

To tap into the Portuguese market, Nepal should prioritise enhancing its supply-side capacity, including strengthening the capabilities of certifying agencies to ensure compliance with the quality standard set by Portugal. Additionally, efforts should be made to increase production, minimise production costs and enhance product quality. Streamlining procedures to expedite supply times and improving the quality of logistics services are equally important in this endeavour.

It is also necessary to address the following issues to effectively tap into the potential Portuguese market. First, the Nepali mission in Portugal should disseminate market-related information to Nepali promotional agencies and exporters. This information should include details regarding the Portuguese import process, tax provisions, non-tariff measures, import trends, information on trade fairs and exhibitions, as well as potential Portuguese importers of Nepali products.

Similarly, the Nepali mission should play a facilitating role by assisting Nepali participants at trade fairs organised in Portugal. Moreover, the mission's role will be crucial in connecting Nepali exporters with Portuguese importers by organising B2B meetings between Portuguese importers and Nepali exporters. It is equally important to organise a "Nepal Trade Fair" regularly, specifically targeting the Nepali and South Asian communities residing in Portugal. Such fairs and exhibitions will be instrumental in promoting traditional Nepali products among the Nepali and South Asian communities.

It is also necessary to take initiatives to promote investment from Portugal in export-oriented industries in Nepal. Given the growing domestic market and the lucrative markets in India and China, the olive oil industry stands out as a particularly appropriate sector. Portugal's experience as one of the world's leading producers of olive oil could greatly benefit Nepal's olive oil industry. A coordinated communication network should be established among key stakeholders, including the Ministry of Foreign Affairs, the Ministry of Finance, the Ministry of Industry, Commerce and Supplies, the Trade and Export Promotion Centre, the Nepali Mission in Portugal, and the private sector to materialise this.

Importing semi-processed goods, processing them with cutting-edge technology, and exporting these products under their own brand has become a characteristic feature of Europe's trade. Nepal should follow suit and products such as natural honey and semi-processed sugar are prime candidates to benefit from such trends.

Expanding bilateral trade between Nepal and Portugal requires increasing exports of traditionally traded goods to Portugal, exporting daily consumer goods targeting the Nepali and South Asian communities, supplying Nepali products to export-oriented industries in Portugal, stimulating investment from Portugal in Nepali export-oriented and import-substitution industries, and facilitating the import of mutually advantageous products from Portugal. 

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

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