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Home Business Market Solution to Alarming Nepal’s Trade Deficit: Export of High Value Goods

Solution to Alarming Nepal’s Trade Deficit: Export of High Value Goods

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Nepal continues to suffer a huge deficit with majority of its trade partners. The loss with its two neighbouring countries is at alarming position. According to the recent records released by the Department of Customs, the export trade of the country dropped by 17.5 percent last year. Nepal imported goods and services worth NPR 774.7 billion in the last fiscal year while its exports were only NPR 70.25 billion, NPR 15 billion less than in the previous year. Thus, leaving a massive deficit of over NPR 700 billion.



We know that export trade plays a vital role in earning foreign currency. Nepal, however, is almost fully dependent on remittances coming in from overseas as its tourism and export trade sector both are not well developed. Nepal exports goods that are largely labor intensive like handicrafts, carpets, textiles, and indigenous artifacts. Another characteristic of its export is little value addition as the exports includes materials like raw-hide, ginger and other agro products. This is important to understand that Nepal is not a coastal state and we should stop pursuing policies as if we are a coastal state. Focusing on the development of high value and low volume products should be our main strategy to narrow the export-import gap. Mr. Swarnim Wagle, former member of National Planning Commission also recently stated that developing high value and low volume products could be the paradigm shift in the country’s existing trade scenario. Some typical Nepali products branded as ‘produced in the Himalayan nation’ have unique selling proposition in the international market — Himalayan Organic Tea, Sherpa Adventure Gear, Himalayan Edition of Kobold watches, to name a few.

Some of the high value and low volume product that Nepal can export are described below:

1) Himalayan Organic Tea:

This is a beverage made from the leaves of tea plants grown in mountains region which are distinctive in appearance, aroma and taste.

Orthodox tea refers to the process where tea is hand- or machine-rolled. Most speciality teas like green tea, oolong tea, white tea and hand rolled tea fall under the category of orthodox tea. In Nepal, orthodox tea is produced and processed in the mountainous. At present, Nepal produces approximately 16.29 million kilograms of tea per annum on an area of 16,718 hectares. It accounts for only 0.4% of the total world tea output. Nepal's teas are mainly exported to India, Pakistan, Australia, Germany, France, Poland, Netherlands, Japan, Belgium and United States of America.

The transition from subsistence farming to cash crop farming of orthodox tea provides a benefit to hillside farmers in terms of financial support and involvement in the domestic market. Forecasts by the National Tea and Coffee Development Board (NTCDB) predict that by 2022 orthodox tea exports will reach 27 million kg. The paired growth in the tea sector will employ approximately 100,000 people. Engagement in overseas markets will allow Nepali tea producers to capitalize on their product’s high quality and value as a niche product. A metric ton of Nepali green tea is valued at $1,180 in India, but $12,000 in the USA. Thus, in order for Nepali farmers and producers of orthodox tea to make the most money from this crop there is a need to export to countries like the USA who pay premium prices for the product.

2) Sherpa Adventure Gear:

Sherpa Adventure Gear is a small brand with a great big heart, and every authentic garment make—for trekking, traveling and exploring the world— reflects our Himalayan homeland.

A proportion of recycled polyester has been used in its making and like many other products from Sherpa Adventure Gear, has been bluesign certified. Bluesign is an environmentally friendly, health-friendly and non-polluting manufacturing process. Hence demand for this product is high in national as well as international market.

As Sherpa Adventure Gear has outlets in UK and USA, it is a multinational brand and supply products to international customer who are fond of climbing mountains. Sherpa Brand has created different position in the mind of customer and demand for such products is increasing day by day. The sale of this product can play a major role in decreasing the trade deficit that exists in Nepal's economy.

3) Himalayan Edition of Kobold Watch:


When talking about country around the world that produce high quality watches, Nepal use to be last name that comes to mind. But now it is changing, Himalayan Edition of Kobold Watched, a limited-edition watch with a very special dial made of rock collected from the top of Mt Everest is becoming popular in the world. These watches are sold at $16,500 each in international market. So, to minimize trade deficit Nepal should focus and promote this product.

4) Pashmina:

Pashmina (Better known as Cashmere), is a fiber extricated from the body of the mountain goat "chyangra". Pashmina, the finest cashmere wool has been popular as the finest, most luxurious wool in the world. This glorious wool has been praised for its warmth, lightness and durability. Pashmina from Nepal is becoming popular in Europe, USA, Japan and is exported to more than 40 countries.The most demanding Pashmina items in the international markets are: Shawl, Stoles, Poncho, Cardigans, Outers, Mufflers/Scarves, Blankets, Readymade garments.In Nepal, Pashminas are absolutely export-oriented industries. Pashmina products account for more than 50% of the total export figure of the handicraft products of the country.

Currently, official figures of pashmina exports in the Fiscal Year 2016/17 show a decline of 11.31 percent year on year. According to a report published by the central bank, Nepal exported pashmina products worth Rs 2.758 billion in FY 2015/16 despite the 2015 earthquakes and the unofficial economic blockade by India.

So, with the consistency in increase in demand of pashmina products in the world market, Nepal still has not been able to significantly increase its share of the pie of the world's pashmina market. With this realization, the country needs to cooperate with the opportunity of growth that exists in export of pashmina products that exists in the international market, the value our country can derive from it and focus on increasing the production of such products and on making export of pashmina seamless. It can play a major role in decreasing the trade deficit that exists in Nepal's economy.

5) Yarsagumba:

Caterpillar fungus or Yarsagumba in Nepali it forms out of the head of ghost moth larvae living in the soil at altitudes above 10,000 feet, and has been used as an aphrodisiac for at least a thousand years, earning it the nickname Himalayan Viagra.


An individual earns Rs 103,000 per year on an average by selling the herb, higher than the average per capita income from other economic activities, according to a Nepal Rastra Bank (NRB) study. The NRB study stated the trend of collecting and selling Yarsagumba not only boosted the people’s incomes, but also helped increase economic activities in the areas. The recent tariff on collection of each kg of Yarsagumba is Rs 25,000. The money collected through tariff is being used in various rural areas. For example: In Tanki-Manang village of Manang district, Rs 30 million was collected from Yarsagumba harvesters was used to build community micro hydro project of 160 kilowatt.

6) Rudraksha:

Rudraksha is exceptionally well known in Nepal. Around 25% of the trees are found in Nepal. Nepal has positive atmosphere and tropical and subtropical territories to cultivate it. The matter of Rudraksha is developing quickly in Nepal and it has additionally been gotten by foreign eyes. The Rudraksha business has brought about one of the gainful business in Nepal as it is extremely mainstream inside the nation, particularly among the Hindus and Buddhists. Since Rudraksha business has begun getting a market in the remote land, its costs have ascended. The costs of Rudraksha differs as indicated by the mukhis. Merchants say the quantity of edges in a Rudraksha seed depicts its cost. We can purchase a typical 5 mukhis rudraksha.

The wide notoriety of Rudraksha has ascended its cost. 'Agriculturist wins Rs 1.2 million-offering Rudraksha' in 2014. It appears that Rudraksha business has been one of the productive business for Nepalese. The prices of Rudraksha ranges from Rs 100 to millions of rupees depending upon the edges present in the Rudraksha. So, Nepal can earn handsome economic benefits by trading rudraksha in Nepal as well as in international market.

Conclusion

After successful implementation of constitution and formation of government, now it is time for the much-needed economic revolution for the prosperity of the country and people. Being a landlocked economy, the best strategy for Nepal is to have a minimal use of transit route of the coastal state. The focus should thus shift to export of high-value low-volume products that were described above. Our policies need to align accordingly, starting with self-dependence in national security, food, fuel, weaponry and manpower. The new government should restore old industries and build new ones and produce consumables here in the country rather than importing them. Finished products from local raw materials, native techniques, domestic investment and Nepali labor should be our national priority. The indigenous products should be preserved, industrialized and protected with patents. This will provide them with favorable environment to flourish. The imports should be limited to the capital goods that are used to expand the production base and that could ultimately help build the trade capacity in the future. If these strategies are carried out accordingly; then only it will be possible to expand the export trade and help bring down the ballooning trade deficit and maintain a favorable trade balance.

Article by: Swarnim Pradhan ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ), Ashish Lohani ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ), Lil Bahadur Gurung ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) ,Sagar Niraula ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ), Sajina Karmacharya ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) ,Sangam Paudel ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ),Suwash Gautam ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ); Ace Institute of Management


Last Updated ( Friday, 23 March 2018 15:02 )  

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