Trade facilitation offers pathways to sustainably enhance trade, fortify global supply chains and curb trade costs.
Nepal, which is set to graduate from least developing country (LDC) status in 2026, is putting efforts to boost its economy by connecting to different regional and global trading networks. Besides being the linking points for economic growth, trade also stands as a catalyst for sustainable development. Factors like geopolitical situation, situational conflicts and inflation pressure have been impeding Nepal’s international trade. Trade facilitation, therefore, is a must to address such challenges. It helps to maintain sustainable development by making trade easier, strengthening global supply chains and reducing trade costs.
Amidst the backdrop of the COVID-19 pandemic, the global supply chain faced significant disruptions, impacting both livelihoods and economies worldwide. As the situation started to return to normalcy, Nepal had to face several unfavourable situations such as internal and external economic shocks, political instability, geopolitical tensions, and strains within domestic and international supply chains. all compounded the challenges. Throughout this turbulence, global trade networks have played a crucial role in facilitating economic restructuring, cost management and commercial adaptability. According to the Asia-Pacific Trade Facilitation Report 2024, trade costs are increasing due to global supply chain disruptions. Geopolitical conflicts have caused further disruption to global supply chains and high inflation is contributing to increased trade costs and uncertainty, which has put pressure on already high trade costs in Asia and the Pacific. The 2023 UN Global Survey on Digital and Sustainable Trade Facilitation shows continued progress in streamlining and digitising trade processes in Asia and the Pacific. The UN Global Survey reveals that the regional average implementation rate for 31 "general" and "digital" trade facilitation measures stands at 67% in 2023. Based on 46 common countries, an increase of three percentage points was observed in 2023 compared to 2021.
However, implementation rates vary greatly between subregions in the region. Building on measures outlined in the WTO Trade Facilitation Agreement (TFA), countries in Asia and the Pacific would benefit greatly from trade digitisation. The 2023 UN Global Survey indicates that the WTO TFA-related measures are generally well-implemented in the region, with implementation rates typically exceeding 75%. On the other hand, despite continual advancement in enhancing national paperless systems for exchanging trade-related data and documents, countries in the region continue to face challenges in implementing cross-border paperless trade, as shown by the average implementation rate of only 42%. The Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific can serve as a dedicated, inclusive, and capacity-building intergovernmental platform to support countries toward realising trade digitisation objectives in the Asia and Pacific region.
Nepal has made remarkable achievements in implementation of TFA measures. The restructuring of customs procedures and the development of infrastructure are the noticeable advancements observed. The major border checkpoints, including crossings and Kathmandu, have significantly strengthened efficiency in customs procedures. The piloting of the Electronic Cargo Tracking System (ECTS) for imported goods have not only circulated hopes to increase transparency but have also reduced the risk of unauthorised diversions. Likewise, the establishment of the National Trade Facilitation Committee under the Minister for Commerce and Supplies has ensured the participation of the private sector. The committee also aims to guide policy formulation and implementation. In addition, this committee facilitates coordination and alignment with trade facilitation measures and international agreements, such as those under the WTO TFA.
Geopolitical conflicts have caused further disruption to global supply chains and high inflation is contributing to increased trade costs and uncertainty.
The Automated System for Customs Data (ASYCUDA) records 99.9% of customs data and has been operated through an electronic single window. Customs modernisation in Nepal has expedited the procedure to enhance trade efficiency, reduce trade costs and foster economic growth. Capacity building of the customs officials, border agencies and private sector representatives in the implementation of TFA measures have increased cooperation among the stakeholders, while also ensuring alignment with international standards and best practices. Nepal has reflected these achievements in the current plan and the drafting of the 16th periodic plan, alongside the Nepal Trade Integration Strategy 2023 and the Trade Deficit Reduction Action Plan. The government has adopted a long-term approach to economic development through trade, with the drafting of a new trade policy and the customs bill, which is under discussion in parliament.
Nepal's active participation in international forums and commitments to major conventions and agreements highlight its dedication to global trade cooperation. As an active member of global and regional organisations including the World Trade Organisation (WTO), Nepal has established itself as a key player in the regional and global arena. Nepal’s bilateral trade relations with India and China have promoted regional trade connectivity in the South Asian region. Likewise, Nepal’s accession to SAFTA, BIMSTEC, and the WTO's conventions and agreements with wider coverage, including transit trade, intellectual property rights, harmonised commodity coding and regional economic cooperation, have strengthened the nation’s commitment to trade facilitation.
However, the country is facing various challenges in fulfilling its trade facilitation agreement which has hindered its progress and effectiveness. Nepal has completed only two measures out of 36 in Category A. Likewise, 21 measures in Category B have been awaiting entry into force since the beginning of the agreement. Still, 13 measures in Category C require assistance and support for capacity building. Insufficient trade-related infrastructure, which includes ICT at border points and within the country, is one of the pressing issues in this area. Likewise, needful coordination in the development and maintenance of transit transport infrastructure is lagging as this demands a higher capital budget. The slow progress in customs cooperation at the regional and subregional level has complicated trade processes. The higher trade costs are linked with the export-reducing effect which is hurting economic growth. This is one of the reasons behind Nepal’s inability to harness trade potentialities. Lack of product diversification, lower value addition and limited trade partners are other challenging factors in this area.
Despite the challenges outlined above, Nepal stands poised to seize promising opportunities for implementing Trade Facilitation Agreement (TFA) measures. International cooperation, particularly through initiatives like the Doha Programme of Action, is crucial to bridging digital divides and ensuring the timely and effective implementation of TFA measures. Regional platforms such as SAARC and BIMSTEC offer valuable avenues for strengthening cross-border trade and facilitating Nepal's integration into global and regional value chains. Moreover, adopting corridor perspectives with the support of neighbouring countries and development partners can pave the way for smoother trade routes which enhance Nepal's trade prospects.
The integration of Information and Communication Technology (ICT) alongside advanced technologies such as Industry 4.0 and 5.0, with the support from development partners, can enhance trade facilitation processes in Nepal. Likewise, collaboration with neighbouring countries can further strengthen economic integration and interdependence. Additionally, addressing the unique challenges faced by landlocked developing countries within global forums like the WTO, particularly through platforms like the Sub-Committee on Trade Facilitation, can catalyse collective action to overcome exceptional hurdles. By pursuing integrated approaches and fostering global cooperation, Nepal can navigate the challenges and unlock its full potential as a land-linked country in the global market.
To sum up, Nepal's ongoing efforts in trade facilitation implementation reflect a positive stride towards leveraging international trade opportunities for economic growth, while adhering to global best practices and standards. This journey highlights Nepal's commitment to harnessing the transformative power of ICT and policy reforms and driving sustainable economic advancement in the region.
(Joshi is Under Secretary at the Ministry of Industry, Commerce and Supplies)
