Govt leaves exports target unchanged

WITH the export sector’s performance remaining pathetic, the government has kept the exports target unchanged for the proposed 13th periodic plan. The government has targeted to increase the country’s exports to Rs 100 billion and cut the trade deficit to 20 percent of the gross domestic product (GDP) by the end of the plan period. The 12th periodic plan also had the same targets. At the beginning of the 12th plan in 2010-11, Nepal’s exports were at Rs 61 billion and trade deficit at 26 percent of the GDP. By the 11th month of 2012-13—the last year of the plan— exports rose to just Rs 69.3 billion against the target of Rs 100 billion. Government officials admitted that the dismal state of the export sector discouraged them to increase the targets. “There are no grounds for being ambitious in exports growth,” said Puspa Lal Shakya, joint secretary at the National Planning Commission (NPC). In the first 11 months of 2012-13, Nepal’s incurred a deficit of Rs 480.33 billion—28.23 percent of the GDP, according to the Trade and Export Promotion Centre (TEPC). This shows the entire remittance and exports are not enough to neutralise the trade deficit, with the country’s income remaining at just Rs 457.76 billion in the review period. Former Finance Secretary Rameshore Khanal said Nepal dœs not have the capability to boost exports massively in the near future to bring down the deficit. “The country neither has proper investment environment nor the products which can possibly be exported massively within the next few years,” he said. “That’s why there are no reasons to be ambitious in exports target.” The budget for this fiscal year has doubled the resources for increasing production, extension, diversification and marketing of products identified by the Nepal Trade Integration Strategy 2010 as having comparative advantages. But Khanal said none of the products can be exported in volumes any time soon to bring down the trade deficit significantly. Petroleum imports are the biggest contributors to the country’s trade deficit. Fuel imports alone amounted to more than Rs 100 billion in the 11 months, according to the TEPC. As a majority of the imported commodities—from petroleum to raw materials—are the necessities, experts say there is little scope for reducing the trade deficit in the near future. “When exports cannot be boosted, the only way to reduce the trade deficit is by taking import substitution measures,” said Khanal. “Nepal can do so by increasing energy and agriculture production.” Khanal said the massive petroleum import is due the lack of alternative energy sources. “If we can add 600MW power, we will be able to reduce petroleum imports by Rs 16- 20 billion,” he said. Trade expert Posh Raj Pandey said people are diverting their investment to trading and commission-based businesses as they find more profits in such activities compared to the vulnerable exports business. “Without massive investment in the export sector, exports cannot be increased to the desired level. But there is no investment climate in the sector,” he said. Earlier, readymade garments and carpets were the leaders in exports, but due to their inability to compete in the international market, the exports nosedived. Exports of these products until a few years ago used to cross Rs 10 billion each. But the situation has worsened to such an extent that as of the 11th month of the last fiscal year, readymade garment exports stood at Rs 2.87 billion, and carpet exports at Rs 5.53 billion, according to the Nepal Rastra Bank statistics. Khanal, however, said these products could still perform well if necessary infrastructure is prepared for them as what Bangladesh has done for its garment sector.