Important Measures and Initiatives on Trade Facilitation in Nepal

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Important Measures and Initiatives on Trade Facilitation in Nepal

By Tengfei Wang, Posh Raj Pandey, and Shaleen Khanal
via Asian Development Bank 

Important Measures and Initiatives on Trade Facilitation in Nepal

The Government of Nepal has recognized the importance of trade facilitation through simplification, harmonization, standardization, and modernization of trade and customs procedures, identifying trade
facilitation as a key reform agenda. Transaction cost reduction through trade facilitation and institutional reforms is one of the strategic pillars of the Trade Policy 2015. Similarly, the 13th Development Plan (2015/16–2017/18) and Trade Policy 2015 identifies various actions to improve the state of trade facilitation. The Department of Customs has been reengineering its reform and modernization program within the purview of Customs Reform and Modernization Strategies and Action Plan (CRMSAP). Currently, CRMSAP for 2013–2017 is under implementation. One of the activities identified under the CRMSAP is reducing the excessive government documents and making export and import requirements more transparent, clear, and specific. Under the CRMSAP, the Department of Customs has successfully managed to reduce documentation requirements, expedited export-import procedures in major customs across Nepal published necessary trade procedures and customs valuation online, and made customs valuation system more transparent. More serious initiatives include implementing ASYCUDA (Automated System of Customs Data) World, integrating customs points via wide area network, establishing post-clearance audit mechanism, and strengthening other areas of risk management. These initiatives have further been complemented by improvement in road and customs infrastructure across major trading points.

In 2012, the Government of Nepal set up Nepal Transport and Trade Facilitation Committee (NTTFC) under the chairmanship of the Ministry of Commerce and Supplies Secretary, with representation from government agencies and private sector stakeholders. The objective of the NTTFC is to assist the government in implementing policy reforms, monitor trade initiatives, and recommend new trade facilitation measures. Its primary functions are to coordinate and monitor trade facilitation-related activities, advise the government on regulatory reform, and undertake activities on capacity enhancement and research and development for improving trade facilitation indicators.

From a more systematic perspective, a recent survey conducted by United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and other regional commission has revealed that the average level of trade facilitation implementation by the 44 Asia and the Pacific economies is 46.5%, based on a set of 31 trade facilitation and paperless trade measures.[1] Within the Asia and Pacific region there is great variation in trade facilitation implementation rates. Australia, the Republic of Korea, and Singapore have obtained scores of more than 85%, while other countries have yet to achieve 15% implementation levels. The survey also has shown that the level of implementation of trade facilitation measures in Nepal (34%) is below the level in Asia and the Pacific (46.5%) and in South Asia and Southwest Asia (42%) (Table 1).[2]

Figure 1: Overall Implementation of Trade Facilitation Measures in 44 Asia and Pacific Economies

Figure 1: Overall Implementation of Trade Facilitation Measures in 44 Asia and Pacific Economies

High Trade Costs: A Major Challenge for South Asia Including Nepal


Countries in South Asia including Nepal often face high trade costs. According to the latest data from the UNESCAP–World Bank International Trade Cost Database (Table 1), the intraregional trade costs of Bangladesh, Bhutan, and Nepal (SASEC–3) amount to 186% tariff-equivalent, which is the highest among the selected countries in other subregions in Asia and the Pacific, and has increased between 2003–2008 and 2009–2014. The overall cost of trading goods among the three largest European Union economies is equivalent to a 43% average tariff on the value of goods traded. The People’s Republic of China, Japan, and the Republic of Korea and (East Asia–3) come closest to matching the low intra-European Union trade costs, with average trade costs of 51% tariff-equivalent, followed by the middle-income members of the Association of Southeast Asian Nations with intraregional trade costs of 76% tariff-equivalent.

Table 1: Intraregional and Extraregional Comprehensive Trade Costs in the Asia and Pacific Region (Excluding Tariff Costs), 2008–2013 (%)

Table 1: Intraregional and Extraregional Comprehensive Trade Costs in the Asia and Pacific Region (Excluding Tariff Costs), 2008–2013 (%)

Trade cost reduction is essential to enabling economies to participate effectively in regional and global value chains as well as to continue using trade as the main engine of growth and sustainable development. Recent studies have suggested that much of the trade cost reductions since 2000 have been through the elimination or lowering of tariffs.[3] Therefore, further trade cost reductions will have to come from not only tackling nontariff sources of trade costs, such as inefficient transport and logistics infrastructure and services but also cumbersome regulatory procedures and documentation. Indeed, trade facilitation, i.e., the simplification and harmonization of import, export, and transit procedures that include paperless trade (the use and exchange of electronic data and documents to support the trade transaction process), has taken on increasing importance.


Importance of Monitoring and Measuring Trade Facilitation Performance


Measuring and monitoring trade facilitation performance is essential to reviewing whether the targets are effectively met. Its importance is especially emphasized in the SASEC Trade Facilitation Strategy 2014–2018 that states, “The concrete action plans to be developed to implement the strategic thrusts would need to have clear and measurable goals and a set of indicators to monitor progress and gauge outcomes. . . . Baseline studies on outcome indicators will be conducted and appropriate targets determined for a consistent and regular monitoring and assessment of results.” The strategic framework also emphasizes the importance of an integrated approach for measuring trade and transport facilitation, noting that “an integrated transport and trade facilitation methodology that will link the time release survey, time/cost–distance survey, and the BPA would also be developed.”[4]

Some international organizations emphasize the importance of measuring and monitoring trade facilitation performance. For instance, the World Customs Organization (WCO) proposes that data needs to be collected to review and refine the action plan related to trade facilitation (Figure 2). The Asian  Development Bank (ADB) and UNESCAP prescribe a similar approach on policy reform and performance measurement and monitoring (Figure 3).

Figure 2: Enhancing Trade Facilitation and Performance Monitoring

Figure 2: Enhancing Trade Facilitation and Performance Monitoring

Recognizing the strengths and weakness of international indicators, many countries in the world have taken action to collect more detailed information on trade and transport facilitation to support policymaking.

Figure 3: Step-by-Step Trade Facilitation: A Framework for Action

Figure 3: Step-by-Step Trade Facilitation: A Framework for Action

Key Functions and Features of Trade and Transport Facilitation Monitoring Mechanism


The guide on TTFMM was initially developed by UNESCAP and ADB in consultation with national governments and experts to address the pressing need for the countries in the Asia and Pacific region to establish their own sustainable mechanism for monitoring the effectiveness of trade and transport facilitation reforms and measures and identifying solutions to streamline and optimize trade and transport processes. Many countries around the world, including those in Asia and the Pacific, have made efforts to facilitate trade and transport. Few, however, have established sustainable mechanisms to monitor the effectiveness of policies and procedures that facilitate trade and speed up international supply and value chains. Several global trade facilitation performance surveys and databases are now available and very useful as benchmarking and awareness-raising tools. But they do not provide sufficiently detailed information to develop or update national trade facilitation action plans. Trade and transport facilitation assessments have also been conducted in some countries. In many cases, these are typically ad hoc, with little coordination among development partners and limited support from government agencies.

There is, therefore, a need for countries to establish sustainable national TTFMM systems with two interrelated functions: (i) to measure and assess progress in trade and transport facilitation; and (ii) to assist in formulating, updating, and prioritizing recommendations for trade and transport facilitation.[5] More specifically, adoption of the TTFMM will bring the following benefits

  • streamlined trade and transport procedures, improved trade efficiency, and enhanced trade competitiveness;
  • reliable, systematic, consistent, and harmonized data available for policymaking and modernization;
  • cost-effective and sustainable monitoring of trade and transport facilitation; and
  • enhanced national human capacity for trade and transport facilitation.


The TTFMM framework underlying the baseline study in Nepal is outlined in Figure 4. It is important that TTFMM be anchored within a national trade and transport facilitation committee and can rely upon national resources to make it sustainable and affordable. Underpinning the TTFMM is the Business Process Analysis Plus (BPA+) methodology, which is built on the BPA methodology, supplemented by time release study (TRS) and time/cost–distance (TCD) methodologies.

Figure 4: Trade and Transport Facilitation Monitoring Mechanism

Figure 4: Trade and Transport Facilitation Monitoring Mechanism

Objective of the Study


The TTFMM baseline study in Nepal was conducted as a part of a broad initiative to establish TTFMM in the country in the long term. The study is part of a TTFMM project under the SASEC Program in helping three member countries—Bangladesh, Bhutan, and Nepal—develop effective monitoring systems of their respective trade and transport facilitation reforms and measures, with the aim of better identifying solutions to streamline and optimize trade and transport processes.

The following are the objectives of the TTFMM baseline study:

(i) Provide a set of indicators and underlying data on trade and transport facilitation performance in Nepal. Such baseline data will ensure that the progress or setback in trade facilitation performance in the country can be benchmarked.

(ii) Diagnose key bottlenecks and provide recommendations for removing bottlenecks and simplifying trade procedures. The study provides policy recommendations to policy makers and stakeholders.

(iii) Identify areas of cooperation between Nepal and its regional trade partners to facilitate movement of goods across the SASEC region.

(iv) Propose a way forward to maintain TTFMM sustainability. Sustainability is at the core of the TTFMM design. This report provides specific recommendations on how to maintain TTFMM sustainability including institutional arrangements, data collection and analysis, and the best way to utilize the study output.

Download the TTFMM Baseline Study (in pdf):

Trade and Transport Facilitation Monitoring Mechanism in Nepal: Baseline Study Publication | December 2017

About the Authors:

Dr. Tengfei WangEconomic Affairs Officer, UNESCAP

Dr. Posh Raj Pandey, Executive Chairman of South Asia Watch on Trade Economics and Environment (SAWTEE)

Shaleen Khanal, Research Officer, ‎South Asia Watch on Trade, Economics & Environment

Copyright: 

This article is an exceprt taken from a report authored by Tengfei Wang, Posh Raj Pandey, and Shaleen Khanal and published by Asian Development Bank under the title - "Trade and Transport Facilitation Monitoring Mechanism in Nepal: Baseline Study | Publication | December 2017" and it is licensed under a Creative Commons Attribution 3.0 IGO License provided by the original publisher.

Endnotes:

[1] UNESCAP (2016a). 

[2] UNESCAP (2016b).

[3] For example, see UNESCAP. 2011. Asia-Pacific Trade and Investment Report 2011.

[4] ADB (2014b).

[5] Detailed discussion on TTFMM is available at UNESCAP (2014). More recently, a project to develop a UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT) recommendation on TTFMM has been launched: See UN Economic Commission for Europe (UNECE). Current Projects. Recommendation on TTFMM. http://www.unece.org/tradewelcome/un-centre-for-trade-facilitation-and-e-business-uncefact/projects/current-projects.html.