Note/Material

Trade in Nepal

Objective: To find out the importance of trade and the condition of foreign trade in Nepal.

Introduction:

The exchange of goods between individuals or nations is called trade. Trade is extremely important for the economic development of the country. It existed together with human civilization. It was in the form of a Barter System in the olden days. Later, money was invented to carry out trade systematically as the Barter system had many problems.

Nepal is a land-locked country. It has no outlet to the seaway. Thus, Nepal has limited international trade comparatively. Although people have been involved in trading activities, they are not able to bring it to the level of other nations due to the lack of necessary pre-requisites. Transportation facilities and adequate manufactured goods are lacking in Nepal which has affected Nepalese trade immensely.

In the Lichhavi and Malla periods, Nepal had the upper hand in trade with Tibet and India and was in surplus too. Today, we are in a trade deficit.

Normally there are 2 types of trade on the basis of the area covered by trading activity:

  1. Domestic (Internal) Trade:

Buying and selling of goods within the country are called internal or domestic trade. It includes international and national goods. Internal trade satisfies the need of people around the country. In the past only a few places were connected with transportation facilities so, trade was quite different. Today, with the construction of many highways trading activities have been much easier though it is not up to the level of expectation.

External (International) Trade:

Buying and selling goods between two or more countries is called external or international trade. In the present world, surplus goods of a country are exported to other nations, and the required goods are imported. International trade is very important to bring about effective development in a country.

Nepal, having no access to the sea route has not been able to develop international trade to a great extent. Now, Nepal is a member of WTO (World Trade Organization) and SAARC which has been implementing SAPTA (South Asian Preferential Trading Arrangement) and SAFTA (South Asian Free Trade Area). In the near future, Nepal will compete with international goods and in long run, it benefits Nepal.

Importance of Foreign Trade in Nepal:

Foreign trade plays a vital role in the development of a country like Nepal. The following points prove its importance in our context:

  1. It creates employment opportunities.
  2. It makes goods available at a cheaper rate.
  3. It directly helps to develop industries.
  4. It spreads our handicrafts and garments to foreign countries.
  5. It earns foreign currency.
  6. It develops international relationships.
  7. It creates easy access to foreign goods

Problems of foreign trade in Nepal and their possible solutions:

  1. High Import and Low Export:

Nepal is not able to produce enough surplus goods to export to other nations. Due to this, our country has to import all required items from other nations which means our export is very low. This has resulted in a trade deficit in Nepal.

Solution: We should establish more large-scale industries and produce quality surplus goods to export to other nations. The government and private sectors should focus more on export-based products and maintain very good trade links with other countries.

2. Nepal does not have an outlet to sea:

Nepal, having poor access to transit facility has always been depending on India for the purpose. While trading the goods through the surface route, it becomes very costly. We do not have direct access to seaway which has hindered an effective and efficient trade link with other nations.

Solution: Although Nepal is a land-locked nation, our government should establish bilateral agreements with India and free trade the goods through Kolkata transit. We should also produce high-quality products which will be demanded by the people of other nations. In such a situation, they will come to Nepal to import these goods to their nations.

3. Dependence on Primary Products:

Nepal mostly exports primary products through agriculture which is not beneficial. In turn, we have to import the manufactured goods prepared from the same primary products at a higher cost. Except for a few items exported to other nations from Nepal like readymade garments and carpets, others are mostly primary products which have resulted in trade balance and deficit in Nepal.

Solution:

Nepal should realize and stop exporting primary goods. Instead, the country should produce secondary goods and sell them at a higher rate. The government should establish more industries to change such primary goods into manufacturing goods.

4. Low-quality goods and high cost of production:

The goods produced in Nepal are of inferior quality. The old technology adopted in our industries results in low quality and production cost increases. That’s why Nepalese goods can’t compete with international goods.

Solution: The government and industrialists should introduce the latest technology and have proper quality control in the industries. Nepal-made goods should be able to compete internationally. When we use proper technology, the production rate decrease, and the traders are in surplus.

5. Open Border:

Although an open border with India is good for Nepal in many areas, trade has been badly influenced. Many goods are exported from Nepal and imported from India without notice. Smuggling is widespread throughout the border of the country.

Solution: The government should bring effective policy to control smuggling at the border side. The private sector and local community also need to be watchdogs and stop illegal export and import.

Group Activities:

  1. Explain the possible solutions to the problems of foreign trade in Nepal.
  2. Trade is an extremely essential indicator of economic development. Prove the statement.
  3. Explain the types of trade.
  4. Explain the problems faced by Nepal in foreign trade.

Presentation: All groups present their works in 10 minutes

Assignment:

  • Many land-locked countries in the world have carried out very good foreign trade but Nepal is lagging behind in it. What should be done to develop foreign trade in Nepal? Explain your creative idea.

Source: Foreign trade in Nepal from the internet, UNDP yearly publications on developing nations, five years and interim planning, parents, teachers, newspapers, and neighbors

Presentation for the next day: A short skit on internal and external trade