SAWTEE participated in a dialogue with the private sector in an interaction event virtually organized by the National Planning Commission (NPC) on 15 February 2022. The programme sought the private sector’s perspectives on the impact of Nepal’s graduation from the least developed country (LDC) category to ensure that the transition strategy that NPC is preparing tackles the issue comprehensively. The private sector representatives expressed a general concern about the graduation and identified the need for government support, including in getting the best-available preferential schemes such as GSP+, in mitigating the impacts.
Dr. Posh Raj Pandey, Chairman,
SAWTEE, emphasized that graduating out of LDC status will not mean that Nepal
will lose all the preferences as many of the preference-granting countries
still offer next-best preferential schemes to the graduating countries. Getting
into alternative preference schemes such as the European Union’s GSP+ and
United Kingdom’s Enhanced Framework will mitigate most of the potential
trade-related losses, added Dr. Pandey.
Mr. Gyan Chandra Acharya, Nepal’s
ambassador to the United Kingdom, and former head of SAWTEE Center for
Sustainable Development, acknowledging challenges that accompany LDC graduation
mentioned that LDC graduation should also be taken as an opportunity for
structural transformation, increased participation in global value chains and
regional value chains, and productive capacity enhancement. He emphasized that two
kinds of strategies will be important for Nepal to graduate out of LDC status—a
strategy for maximizing LDC-specific benefits that it is entitled to for about
the next 8 years and a strategy on how to ensure a smooth transition out of the
LDC status after we graduate.
Dr. Dilli Raj Khanal, an
economist consulting for the NPC on LDC graduation, emphasized that the impact
of LDC graduation has to be assessed in the context of complex inter-linkages in
the economy to ensure resilient and irreversible graduation.
Mr. Gokarna Awasthi, Deputy
Director-General, Federation of Nepalese Chambers of Commerce and Industry
(FNCCI), highlighted the adverse outcomes that may emanate from the graduation
and identified support from the government (including in getting Nepal into
GSP+), identification of new market for Nepal’s products, and formulation of
strategies that gain private sector’s ownership as crucial in ensuring a smooth
transition.
Mr. Birendra Pandey, Vice-President,
Confederation of Nepalese Industries (CNI), acknowledged LDC graduation as a
development milestone and highlighted 34 interventions that CNI has identified
as crucial in mitigating the adverse impact of LDC graduation, including
measures to reduce the cost of production, increase investment in industry
infrastructure, improve internal competitiveness, and improve the business
environment, among others.
Mr. Umesh Prasad Singh,
President, Federation of Nepal Cottage and Small Industries (FNCSI), emphasized
the need to take on board the concerns of the micro, cottage, and small
industries in the graduation strategy to tackle special obstacles these
industries face despite their significant contribution to the economy.
Mr. Rajesh Chandra Lamichhane,
CEO of Garment Association of Nepal, mentioned that loss of trade preferences
will have severe impacts on the readymade garments sector given that the cost
of production in Nepal is already much higher than that in neighbouring
countries because of Nepal’s structural constraints. Furthermore, he pointed out that SMEs will be
the ones predominantly affected. To mitigate the impacts, GSP+ has to be the
number one priority, along with a longer transition period, if possible, Mr.
Lamichhane remarked.
Neeraj Rathi, Vice-President,
Nepal Tea Association, pointed out that trade preferences in external markets
have been a boon for Nepali tea producers against the presence of structural
impediments such as extremely high logistics costs, low economies of scale, and
poor brand recognition. Hence, apart from making utmost efforts to secure
preferential market access for Nepali tea, if the government supports the
sector by mitigating the structural impediments it faces, Nepal’s tea sector
can flourish into its first billion-dollar industry, said Mr. Rathi.
Mr. Kewal Prasad Bhandari,
Secretary, NPC, emphasized that the government is making significant efforts to
prepare an effective graduation strategy, which will address many of the
concerns mentioned by the private sector.
The programme was attended by
representatives from NPC, private sector associations, think tanks, and experts
on the topic.