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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.