Nepal is least open to international trade in South Asia, according to a latest report published by the World Economic Forum (WEF).
As Nepal does not have adequate policies, infrastructure and services to facilitate free flow of goods into the country and over its borders, it is ranked least open in Enabling Trade Index 2014 that is compiled every two years.
With a score of 3.3 points the index – that is calculated with various sub-indices like market access, border administration, infrastructure, and operating environment – has ranked Nepal 116th among 138 economies from the 124th rank in 2012.
However, the improvement in last two years could not improve its ranking in the region. Nepal is still the lowest among South Asian countries, except Afghanistan and Maldives, both have not been covered by the index.
Sri Lanka is ranked 84th, India 96th, Bhutan 107th, Pakistan 114th and Bangladesh 115th in the index.
According to the report, lack of efficient and transparent border administration is one of the biggest challenges facing Nepal in enhancing its trade competitiveness. “It takes around 39 days and 11 documents to import, and 42 days and 11 documents to export goods,” the report said, adding that one needs to fork out $2,400 to import and $2,295 to export a container of goods. “It is ranked 125th in border administration sub-index, with a score of 3.1 points.”
Likewise, the country is still not very open to foreign goods as it slaps average applied tariff rate of 17.7 per cent — one of the highest in the world — while share of duty free imports hovers around 6.3 per cent.
The report also stated that rampant corruption at the border has made exporters face difficulties in meeting quality and quantity requirements of buyers, apart from low production technology and skills. “There are problems in identifying potential markets and buyers too.”
However, Nepal could still become a manufacturing hub, as average tariff faced by Nepali goods abroad stands at 4.9 per cent, which is one of the best in the world,” according to the report that has made Nepal score 80.6 in the index of margin of preference in destination markets negotiated through bilateral or regional trade agreements or granted in the form of trade preferences. “Due to the better score in index of margin of preference in destination markets, Nepal secured third position in foreign market access sub-index with a score of 4.7.”
But Nepal needs to do more to uphold property and intellectual property rights – in which Nepal has secured 105th and 109th positions – apart from easing the process of hiring foreign workers, reduce incidents of crime and violence, and increase access to loans, according to the report.