As an encouraging sign for our beleaguered economy, Nepal’s export earnings have reached an all-time high of Rs 217.91 billion during the 10 months of the current fiscal year. This 72 percent increase offers a rare bright spot in an economy long overshadowed by massive trade deficits. Much of this rise comes from the export of processed edible oils, mainly soybean and sunflower oil, which together account for over 40 percent of the export total. The export surge does show one thing: Nepal’s economic endeavor can generate positive outcomes when incentives are in place and markets are accessible. The export spike confirms the country’s logistical ability to process, package, and ship goods in large volumes. And, these skills can be redirected toward value-added exports using local raw materials. For a country that runs trade deficits with over 130 nations, this offers an important lifeline for its economy. Nepal’s trade deficit still stands at a staggering Rs 1.25 trillion. But it can be lowered if policy and infrastructure align with production needs. The record spike in export shows that Nepal can build export capacity.
However, despite our exports reaching a historic high, there is a caveat: the government must not over-rely on exports of goods made from imported inputs, as economists say this is not a sustainable strategy. Sooner or later, either the Indian tariff advantage will shrink or global crude oil prices will climb, making the margins less attractive. Nepal needs to move away from this model by investing in industries that use local resources, manpower and technology. Cardamom, carpets, jute products, fruit juice, tea, ginger, and steel are a few products that are already making a modest contribution to export revenue. If given the proper assistance, such as improved logistics, financial access, a steady supply of electricity, and more lenient regulations, these industries have the potential to expand and promote sustainable export growth. Boosting domestic agriculture has a lot of potential to lift exports of our locally grown goods. Sadly, despite being an agricultural society, Nepal imports, in higher volumes, basic food grains and vegetables that can be grown at home. But as our farmers face unpredictable policies, unreliable irrigation and limited market access, besides nominal or no access to government provided resources, our production of food grains and vegetables have hit low. Solving these gaping problems that threaten the agricultural sector would not only reduce imports but also generate surpluses for export. This in turn can start to narrow the huge deficit.
Foreign trade back on track: Exports doubled in Shrawan
The government’s inclination of offering subsidies and duty concessions without planning for long term competitiveness must end while trade policy should be made to do more than fill gaps: it should focus on comparative advantages of products. While customs incentives for edible oil processing brought short term gains, there is a danger that this might deviate policy makers’ attention from other struggling sectors. Export growth should not distract our attention from the real challenge: If Nepal wants to shift its trade towards favorable balance it has to treat the recent spike as a starting point to boost trade rooted in domestic production. Policymakers can build on the recent success by bringing in more resources and technology to increase production of locally made goods such as tea, coffee, lentils, woolen goods, carpets, garments, and handicrafts of which demand is rising steadily in our neighborhood and beyond. This can be a sure way to give continuity to the present record surge in exports.
