Foreign trade is not in favour of Nepal. It is not in balance. There are several problems in foreign trade: land-locked, open border with India, high import and low export, low quality goods high cost of production, low capital formation, tough competition, lack of proper policy etc.
Problems of Foreign Trade in Nepal with Solution
Land-locked is one of the major problems of foreign trade in Nepal. Nepal, being a landlocked country, has no seaports. She has to travel through India to be able to use Indian ports. Quite often do come unexpected transit problems. Transportation cost, demurrage charge and insurance charge make the goods more expansive. It takes longer time as well.
Open Border is one of the major problems of foreign trade in Nepal. Nepal, which is bordered by India from three sides, has open border policy with India. There is a large flow of Indian goods at cheap price. At borders, on one hand, Indian goods are smuggled in and imported foreign goods smuggled out into India through unofficial routes. Individuals and businessmen get high benefit but the country gains a little. This has been hurting foreign trade badly.
High Import and Low Export :
High Import and Low Export is one of the major problems of foreign trade in Nepal. Nepal imports more than it exports both in terms of items and value. Most of the things exported are agricultural products, handicrafts and raw materials, which don’t earn much. It imports a lot of goods of daily uses and also expansive luxurious items. This has caused tremendous trade imbalance.
Low Quality Goods, High Cost of Production
Low Quality Goods, High Cost of Production is one of the major problems of foreign trade in Nepal. Nepal doesn’t have yet well-developed industrial base. Its products are generally of low quality. At the same time, due to various reasons, the cost of production is also high. This makes Nepali products unable to compete in international markets.
Low Capital Formation:
Low Capital Formation is one of the major problems of foreign trade in Nepal. There are very limited economic activities in Nepal. The infrastructures for development and industrial base are not well developed. There lacks favourable environment for both private and foreign investment, which means there is very little capital formation in the country. This is not a favourable situation for international trade.
Tough Foundation is one of the major problems of foreign trade in Nepal. International trade is becoming more and more competitive. Many countries export quality goods at lower rate to increase their share in the international trade. Nepal lacks skill, resources, technologies and support bases to compete in the international markets. Some countries do have even policy of protecting their own industries and products, and give subsidies on their products.
Lack of Proper Trade Policy
Lack of Proper Trade Policy is one of the major problems of foreign trade in Nepal. Nepal has adopted a liberal trade policy since 1990. According to this policy, Nepal has been following open door policy. This allows uncontrolled flow of foreign goods into Nepal, whereas Nepal doesn’t have the capacity to counter this. This is causing large trade deficit. There lacks proper trade policy due to political instability and lack of political commitment.
I am Jitendra Sahayogee, a writer of 12 Nepali literature books, film director of Maithili film & Nepali short movies, photographer, founder of the media house, designer of some websites and writer & editor of some blogs, has expert knowledge & experiences of Nepalese society, culture, tourist places, travels, business, literature, movies, festivals, celebrations.