Nepal’s Graduation to Developing Country Status Could Jeopardize GSP Plus Benefits, Private Sector Warns

The private sector has warned that Nepal’s graduation to developing country status could make it difficult for the country to secure the European Union’s (EU) special Generalized System of Preferences Plus (GSP+) benefits.

Currently, Nepal enjoys duty-free access to the EU market under the “Everything but Arms” program, which allows the export of all products except weapons. However, this facility will automatically end after 2026, when Nepal exits the list of least developed countries (LDCs). To maintain preferential access under the GSP+ scheme after graduation from LDC, Nepal must implement 27 international conventions, including those on labor rights, human rights, environmental protection, good governance, and anti-corruption measures.

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) noted that several of these conventions are closely linked to Nepal’s current labor policies, legal frameworks, and industrial environment. Full compliance with these conventions is currently challenging and may not be achievable until the country’s economic conditions improve.

Key Challenges: ILO Convention 87

Nepal has ratified most of the conventions, including those addressing gender discrimination, children’s rights, civil and political rights, economic, social, and cultural rights, and several ILO conventions. However, ILO Convention No. 87 — on freedom of association and the right to organize — has not yet been ratified, and discussions on its implementation have not begun.

FNCCI stresses that a tripartite dialogue involving the private sector, trade unions, and government authorities is essential in this regard to move forward collectively. FNCCI President Chandra Dhakal highlighted that Convention 87 is particularly sensitive for Nepal, where labor markets remain unstable and the informal sector dominates.

“While it is easy to talk about securing GSP+ benefits in Europe, there are deep legal and policy conditions behind it,” Dhakal said. “Ratifying ILO Convention 87 could negatively impact labor relations and industrial stability in the country.”

The convention grants workers and employers the full legal right to form independent organizations, such as trade unions or associations. While this strengthens organizational freedom, it may disrupt operations and labor management in a context like Nepal, where informal employment is prevalent. FNCCI has formally informed the Ministry of Labor, Employment and Social Security and other relevant agencies about these concerns.

Private Sector Calls for Caution

During a recent discussion organized by the National Planning Commission, Dhakal emphasized that Nepal must fulfill international obligations to remain competitive in the global market. However, these obligations should not adversely affect domestic employment or the investment climate.

FNCCI Treasurer Bhartaraj Acharya said Nepal’s current economic situation and the private sector’s low morale make immediate graduation risky. “Our industries are already facing discouragement. If we graduate too soon, we risk losing the benefits we currently enjoy,” he said. “We recommend postponing graduation for at least three years.”

Acharya noted that losing GSP+ preferences could significantly impact exports and GDP.