TRADE POLICY REVIEW:
Concluding remarks by the Chairperson
- Trade Policy Review: Nepal
This second Trade Policy Review of Nepal has offered us a good opportunity to deepen our understanding of recent developments in, and challenges to, its trade and investment policies since the last review in 2012. I would like to thank the Nepali delegation, led by H. E. Mr. Chandra Kumar Ghimire, Secretary of the Ministry of Industry, Commerce and Supplies , for their constructive engagement throughout this exercise. I would also like to thank our discussant, Ambassador Manuel Teehankee, Permanent Representative of the Philippines to the WTO, for his stimulating observations, as well as the 23 delegations which took the floor, for their active participation in this Review.
Members commended Nepal for the positive economic performance during the review period, with an average annual real GDP growth rate of 4.4%. This was achieved despite being hit by big earthquakes in 2015 that caused considerable loss of lives, and damage to infrastructure and production. It was noted that Nepal is taking steps to diversify its narrow production and export base which continue to be concentrated in textiles, clothing and agricultural products and reliant on a limited number of trading partners, particularly India. Members encouraged Nepal to continue its economic reform process, including through its National Trade Integration Strategy, and address its supply-side constraints, notably high transit and transportation costs. This, in turn, would enable Nepal to tackle its remittances-induced growing trade deficit, further reduce poverty, and achieve its objectives of graduating from LDC status by 2022 and become a middle-income country by 2030.
Members welcomed Nepal's adoption of a new Constitution in 2015. Nepal stated that the new Constitution laid down a solid foundation for the country's socio-economic transformation. Political stability should allow Nepal to update legislation and enact laws which were in development at the time of the last TPR, for example a bill on safeguards, anti-dumping and countervailing measures.
Encouraging Nepal to continue its constructive engagement with the WTO, Members asked Nepal to fulfil its outstanding WTO notifications, including in the areas of domestic support for agriculture, customs valuation, import licensing, and services. Some Members asked Nepal to become an observer to the Government Procurement Agreement and the Information Technology Agreement (ITA), and consider joining ongoing discussions on the MC11 Joint Initiatives. Questions were asked about Nepal's two overlapping regional agreements, the South Asia Free Trade Area (SAFTA) and the Framework Agreement on the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), and on Nepal's 17 bilateral trade agreements.
Nepal was praised for the ratification of both the Trade Facilitation Agreement (TFA) and the Protocol Amending the TRIPS Agreement. Members noted that further to notifying its Category A, B and C commitments under the TFA, Nepal's Customs Reform and Modernization Strategies Action Plan will be fully adopted by 2021, while the National Customs Single Window is being implemented.
Members appreciated that Nepal has a relative open trade regime with a simple average MFN applied tariff of 12% in 2018. Nepal also took several steps to further liberalize its trade regime, including ongoing programmes on import procedures, and the electronic government procurement system. Moreover, new laws have been enacted, such as the Industrial Enterprises Act 2016, the Special Economic Zone Authority Act 2016, and the Labour Act 2017, while other laws are being drafted, notably a new single tax code to improve, consolidate and harmonize the main domestic taxes. However, Members expressed concern over certain areas and invited Nepal to address them. These include: cases when applied MFN tariffs exceed bound rates; simplify the corporation tax and excise duty systems; increase efforts towards regulatory transparency; and invest more resources on its standardization and conformity assessment infrastructure.
Members praised Nepal's general openness to FDI and its recognition of the important contribution it can have on economic development. However, they encouraged Nepal to continue liberalizing its investment regime and address issues of institutional capacity to attract larger FDI inflows, with a view to facilitating commercial activity and stimulating sustainable growth. While acknowledging Nepal's progress regarding intellectual property rights (IPRs) including through the IP Policy 2017, Members urged Nepal to have a more effective enforcement of competition policy and protection of IPRs.
It was acknowledged that Nepal aims to double agricultural production in the next five years, shift a large part of the population to off-farm and other emerging sectors, and develop a trade surplus for agricultural goods. Members showed interest about Nepal's plans to facilitate FDI in hydroelectricity and provide clean energy. Based on tourism-related receipts, Nepal became a net exporter of services during the review period, and Nepal targets welcoming two million tourists under its programme "Visit Nepal 2020". Improving connectivity, particularly with respect to telecoms and transport, is an imperative for Nepal for raising efficiency of the economy and the competitiveness of Nepalese exports.
In conclusion, Nepal has provided answers to almost all advance written questions raised by Members before the deadline. This TPR will be successfully concluded once Nepal has replied to all outstanding questions that emerged during the meeting in a month's time. I believe Members felt heartened by the reforms undertaken and the good results achieved by Nepal and encouraged it to persevere in that path and address the remaining challenges. I hope that the discussion held during this review will prove useful to Nepal in the continued implementation of economic and trade reforms and in its pursuit of policies to achieve sustainable growth and social development.