Expensive credit, import taxes, weak logistics hinder Nepal's exports: study report

KATHMANDU: Expensive credit, taxes on imported inputs and weak logistics are the main obstacles holding back Nepal’s exports, according to a study released in Kathmandu today.

The study, titled 'Nepal’s Exports of Goods and Services: Constraints and Enablers', was unveiled at an event jointly organised by the Asian Development Bank (ADB), Ministry of Finance (MoF), South Asia Watch on Trade, Economics and Environment (SAWTEE) and the Society of Economic Journalists - Nepal (SEJON).

Prepared for the ADB by a SAWTEE research team comprising Paras Kharel, Kshitiz Dahal and Dikshya Singh, the report supported the preparation of the ADB’s Country Partnership Strategy for Nepal (2025-2029) and the search for a new growth model. Kshitiz Dahal, senior research officer at SAWTEE, presented the findings during a workshop organised in coordination with SEJON.

The research surveyed 50 firms, of which 45 completed a structured questionnaire, including 38 exporters. Almost all reported facing obstacles. Access to finance emerged as the primary challenge, cited by about 84% of surveyed firms, with 54% rating it a major or severe obstacle. Interest rates scored worst within this category, followed by interest rate variability and collateral requirements, with small and medium-sized firms affected most severely.

Taxes on imported inputs were highlighted as another bottleneck, with 47% of respondents rating them a major or severe obstacle. Logistics, trade infrastructure, affordable land and difficulties importing inputs were also cited. Firms selling outside India put logistics and trade infrastructure at the top of their list.

Survey respondents also identified weak government support, limited awareness regarding the implications of graduation from Least Developed Country (LDC) status, e-commerce bottlenecks and climate change as emerging risks. Survey participants noted that climate change has already affected the production of key export items, such as cardamom and tea.

Arnaud Cauchois, ADB country director for Nepal, said in his opening remarks: "Nepal needs faster growth to progress to an upper middle-income country. To reach that target, the country needs to change the current growth model that relies on remittances and private consumption to one fuelled by productivity gains and the creation of jobs through domestic private investments and FDI, access to quality infrastructure, adoption of new technologies and accumulation of skills, integration with regional and global value chains, and exports."

Similarly, Finance Secretary Dr Ghanshyam Upadhyay said: "Nepal should move from a remittance-based development model towards one focused on private investment, export competitiveness and job creation." He added that the government could use the study as an important basis for formulating future fiscal policies, promoting digitalisation and integrating Nepal into global value chains.

Exporters pointed to several positive factors, including a growing Nepali diaspora, strong business contacts, duty-free access to the Indian market, trade fairs, existing personal ties in destination markets, export houses and digital marketing.

Regarding information technology, the study highlighted rising global demand for digitally delivered services, citing an estimate of approximately $515 million in Nepali IT export revenue in 2022, representing a 64.2% increase on the previous year. However, it identified gaps in data protection, cybersecurity and intellectual property rights, alongside the lack of a comprehensive IT export policy, foreign currency restrictions for software inputs, weak digital infrastructure and talent shortages.

In the tourism sector, the main bottlenecks identified were the lack of a coordinated strategy across federal, provincial and local governments, limited targeted promotion, underdeveloped destinations, restricted international connectivity and a shortage of skilled workers.

The event featured a panel discussion on addressing constraints and unlocking opportunities in merchandise trade, IT services and tourism. During the discussion, Humkala Pandey, joint secretary at the Ministry of Industry, Commerce and Supplies, stated that the government had introduced new procedures under export policy to support production-based incentives, alongside the Nepal Trade Integration Strategy 2081 and specific export strategies for products such as chhurpi, carpets and ginger.

Nepal Rastra Bank Deputy Director Bishnu Subedi stated that efforts were being made to facilitate exports by providing concessional loans across the value chain.

Santosh Pant, senior director at Nepal Tourism Board, highlighted Nepal’s potential for destination weddings while stressing the need to resolve customs-related complications for importing high-value equipment.

Jan Hansen, principal economist at the ADB, stated that Nepali businesses face difficulties in directly connecting with international buyers and proving compliance with international quality standards.

Darshana Shrestha, president of the Federation of Woman Entrepreneurs' Associations of Nepal (FWEAN), stated that Nepal requires gender-responsive trade policies and a gender-inclusive export system.

Pashupati Dev Pandey, executive committee member of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), stated that slow export growth was due to weaknesses in trade policies, inadequate infrastructure and limited capacity development.

Dev Anand Sarawagi, senior vice president of the Federation of Export Entrepreneurs Nepal (FEEN), stated that heavy dependence on imported raw materials continues to weaken Nepal’s export competitiveness.

Deepen Chapagain, president of NAS-IT, noted that the information technology sector is one of the country's newer sectors with high potential for job creation.

In closing remarks, Manbar Singh Khadka, senior economics officer at the ADB, stated that the study provides an important analysis of Nepal’s export potential, major private sector constraints and necessary foundations for export success.