Home » Policies » Trade Policy 1992 Trade Policy 1992 Objectives To enhance the contributions of trade sector to national economy by promoting internal and international trade with the increased participation of private sector through the creation of an open and liberal atmoshpere. To diversify trade by identifying, developing and producing new exportable products through the promotion of backward linkages for making export trade competitive and sustainable. To expand trade on a sustained basis through gradual reduction in trade imbalances. To co-ordinate trade with other sectors by expanding employment-oriented trade. Basic Policy The role of public sector will be minimised and used as a catalyst to expand the role of private sector in trade. A liberal and dynamic trade policy will be pursued with the objective to improve balance of payments position by promoting exports to increase foreign exchange earnings as well as by fulfilling internal demand of economic and quality products. Production of quality goods and services will be increased for internal consumption as well as for exports through effective and appropriate utilisation of economic resources. Special efforts will be made to promote and diversify trade both in the range of commodities and country destinations. Liberal procedures will be adopted for encouraging interactions between trade and industry for sustained export promotion and for fulfilment of internal demand through increased domestic production. Emphasis will be given on modernising management and technology, on promoting market and on attracting direct foreign investment in order to identify and develop new products as well as raise the production and quality of the traditional products. The public sector trading corporations will gradually be privatised taking into considerations the development and efficiency of the private sector. In support to above policy measures, necessary steps-as pre-conditions-relating to foreign exchange, monetary and fiscal policies, will be taken up towards (full) convertibility of the Nepalese currency in trade and service sectors. For this purpose, major changes will be made in the administrative procedures to make them simple, transparent and dynamic. Taxation system will be simplified by introducing necessary changes in order to foster competition in trade. Emphasis will be laid on institutional development and information network as well as on monitoring system and quality improvement for the promotion of foreign trade. The existing trade treaties and agreements with various countries and international agencies will be effectively implemented, and new ones will be concluded, as and when necessary, for the promotion of international trade. Export Policy The production and quality of exportable products will be raised to make them competitive in the international market. Necessary efforts will be made to increase and diversify exports of goods and services with the objective of increasing foreign exchange earnings. Exports will be promoted by raising the production and quality of traditional as well as new products. Similarly, more emphasis will be placed on the export of profitable but processed and finished products. For the export promotion of these products, new market will be identfied. Foreign exchange earnings will be increased and opportunities for gainful employment will be created by identifying and increasing the production of new products. Service-oriented activities will be promoted to increase foreign exchange earnings. Encouragement wll be given to the export of hydro-electricity on a profitable basis. For the effective utilisation of manpower, stress will be given to the development of appropriate and potential skills to promote service sector as well as export of skilled manpower in an organised way. Appropriate monetary, foreign exchange and fiscal policies will be formulated and necessary changes will be made in the administrative procedures to make them liberal, simple and dynamic in order to implement above policies on an efficient, smooth and transparent basis. Export Strategy Licences will not be required for the export of products other than banned or quantitavely restricted items as listed in Annexure No. 1. In the case of quantitatively restricted products arrangement for issuance of export licence will be made in consultation with the private sector. Quantitative restrictions in the export of such products will gradually be removed through appropriate taxation measures. For export promotion, improvements will be made in the existing transit transport network and its infrastructure. Administrative procedures will also be made transparent, smooth and efficient. For the promotion of exports, container service will be introduced and the existing bonded warehousing system will be further expanded and improved. The duty drawback scheme for the refund of import duty paid on the importation of raw materials and intermediate goods required for the production of exportable products will be effectively implemented. In this context, duty on import of raw materials will be fully exempted taking into consideration the needs, or the bonded warehousing system will be introduced for the storage of such materials. Exports will be free from all charges except the service charge. However, the provisions of para 4.1 above will be applicable in respect of the export of essential products. For the promotion of exports, Export Promotion Zone (EPZ) will be established. No duty will be levied on the raw materials and auxiliary imports used by industries established in such EPZ. Industries exporting more than 90 percent of their production will be granted similar facilities as given to the industries established in EPZ. As a prepatory step towards full convertibility of the Nepalese currency in trade and services, exporters will have to sell in the stipulated percentage the amount of foreign exchange earned through exports of goods and services to commercial banks at a rate fixed by the market mechanism and the remaining balance to Nepal Rastra Bank at an exchange rate fixed by the Government. No licence will be required and no quantitative restriction will be imposed on the imports of raw materials (except stipulated) required for the export-oriented and import-substituting industries. But for the import of such materials, foreign exchange will be made available by the commercial banks at the rate fixed by market mechanism. Exporters will be allowed to open a foreign exchange account in the banks for the purpose of spending certain percentage of one's foreign exchange earnings in trade promotion activities. Export Valuation System will gradually be abolished after the full convertibility of the Nepalese currency. Quality will be tested from time to time in order to improve the standard of exportable products and necessary information will be made available for this purpose. Simple and convenient procedures relating to pre-and post-shipment credits will be adopted on a priority basis. Income tax on income from exports will be fully exempted, and income earned from exports to India on the basis of letter of credit or agreed banking document will also be free from income tax. Emphasis will be given in the development of packaging technology to maintain the quality standard of export products. Nepalese missions abroad will be geared up towards export promotion activities, and trade missions will be opened and institutionalised on the basis of feasibility. No quantitative restrictions will be imposed on the exportable products carried by tourists while returning from Nepal. Export procedures and documentation, thus formulated, will be short and simple. An annual indicative export plan and programme on the basis of feasibility will be formulated with the co-operation of private sector to promote exports. Necessary information and training relating to technology, marketing and export procedures required for export promotion will be provided on an institutionalised basis and arrangements will also be made for the participation in national and international trade fairs for market promotion. Regular monitoring will be made to avoid distortions in exports and imports. Strong actions will be taken in case of misuse of facilities. Export promotion, research and development and training schemes will be developed on institutional basis for developing new exportable products and for raising the quality and production of the traditional exportable products. ˆ Top Deemed Export If any producer earns foreign exchange by selling one's own products to projects run under bilateral or multilateral aid or if such finished or semi-finished products are sold to EPZ, such sales will be granted facilities at par with exports. Customs duty, sales tax and excise duty levied on such sales will be refunded and the income generated from such sales will be exempted from income tax. In addition, foreign exchange earned from such sales can be sold at the rate fixed by the market mechanism after submitting the stipulated percentage amount to Nepal Rastra Bank at the rate fixed by the Government. Import Policy Imports will be planned as a medium of export development and promotion to create competitive industrial and trade environment, and also to ease the supply of materials required for the country through the optimum utilisation of available resouces. In this context, quantitative restrictions will be replaced gradually by such a fiscal measure as to encourage competition in production. Similarly, imports will gradually be tied up with exports. Import Strategy Imports will gradually be tied up with exports with a view to creating a well organised and sustained foreign trade sector by narrowing the gap between exports and imports. The existing import licensing and control system will be simplified. Quantitative resrictions on imports will gradualluy be replaced through the tariff media. Imports of all products other than banned or quantitatively restricted items as listed in Annexure no. 2 will be made free. An annual indcative plan will be formulated to manage imports through auction to allocate required foreign exchange for it and to monitor its utilization. Import procedures and documentation will be made short and simple. Special efforts will be made to reduce transit costs and also to minimise pilferage and demurrage. Import of all goods except some limited items will be allowed through purchase of foreign exchange at the rate fixed by the market mechanism in order to make Nepalese currency fully convertible and to gradually tie up exports and imports. Necessary vigilance will be made to prevent deflections in foreign trade. Import Licensing Arrangement As distortions can be minimised by regulating imports through various policy measures than be made under full control of the government, some items are restricted while some others placed under the auction system requiring licences, and the imports of the remaining items are made free, in the process of making import trade free. Under the system, imports of raw materials, consumer goods, industrial machinery, services etc. have been made free. Import formalities will be as follows : Import licence will be required for the import of quantitatively restricted products, products in excess of the number or quantity fixed under the personal effects and the products under the auction system for the commercial purposes. Imports of all products other than those mentioned in 8.1.1 above are made free. Foreign Exchange Arrangement The foreign exchange required for import purposes will be made available as follows: Nepal Rastra Bank will make foreign exchange available at the rate fixed by the Government for import of goods as per notification issued by Nepal Government in the Nepal Gazette, and to meet the Government expenses. Import of such products will be allowed as spelt out under the para 9.1.3 in the process of increasing the convertibility percentage of the foreign exchange. Foreign exchange required for the import of goods under auction will be made available by Nepal Rastra Bank. In the process of increasing convertibility percentage of foreign exchange, goods which are under the auction will be gradually allowed to be imported under the para 9.1.3 and the number of such goods will be gradually reduced and brought under the purview of market mechanism. Commercial banks will make foreign exchange available at the rate fixed by the market mechanism for the payment of all imported goods including industrial raw materials, spare parts and services and for payments of foreign loans and interests of the non-governmental sector. Nepal Rastra Bank will not make a separate foreign exchange provision for this purpose. Internal Trade Policy A conducive environment will be created for the timely supply and distribution of internally produced and imported products as well. In this context, no restrictions will be imposed on the movement of such products for internal trade. This system will be applicable to the movement of exportable products also. Miscellaneous Procedures relating to imports will be made short and simple through improvements in the transportation, customs and godown procedures. Improvements will be made to make the import valuation system relevant. For this purpose, necessary framework will be prepared. In line with these policies, necessary improvements or amendments will be made on all relevant laws, regulations and notifications relating to exports and imports. Regular monitoring will be done for the smooth and uninterrupted conduct of export and import trade. Institutional Arrangements: Board of Trade: A Board of Trade will be consituted under the chairmanship of the Minister for Commerce with members from related Government organisations and representatives from the private sector to streamline foreign trade, to sort out problems that may arise in the course of implementation of declared policies, to ensure co-ordination among related agencies, and to bring necessary reforms. The Board may further constitute different sub-committees as per requirement of the assigned functions, and the Ministry of Commerce will function as the secretariat of the Board. The constitution of the Board will be as follows: 1 Honourable Minister for Commerce/State Minister for Commerce Chairman 2 Honourable Assistant Minister for Commerce Member 3 Honourable Member (Trade), Nationl Planning Commission Member 4 Governor, Nepal Rastra Bank Member 5 Secretary, Ministry of Finance Member 6 Secretary, Ministry of Commerce Member 7 Secretary, Ministry of Supply Member 8 Secretary, Ministry of Industry Member 9 Secretary, Ministry of Agriculture Member 10 President, Federation of Nepalese Chambers of Commerce and Industry Member 11 President, Nepal Chamber of Commerce Member 12 President, Nepal Foreign Trade Association Member 13 Chairman, Trans-Himalayan Trade Association Member 14 Specialist Nominated by Nepal Government Member 15 Two Chairmen/Presidents of Commodity Associations nominated by Nepal Government Member 16 President, Nepal Bankers' Association Member 17 Additional Secretary, Ministry of Commerce Member-Secretary Other persons may also be invited to attend the meeting of the Board. Details regarding the Board of Trade will be mentioned separately. Foreign Trade Policy and Research Institute: A separate institute will be created as a technical wing of the Ministry of Commerce to identify and develop products, to provide training and to undertake research and studies with the objective of expanding and strengthening the country's foreign trade as well as providing necessary services to the secretariat for making the works of the Board of Trade effective. In the process of constituting this organisation, experts related with the captioned subject to the tune of resources available in the Ministry and its agencies will be mobilized. Details regarding composition and functions of this Institute will be stipulated separately. Nepal Trade Promotion Organisation: An organisation, namely, Nepal Trade Promotion Organisation, will be instituted by reconstituting the Trade Promotion Centre, in joint collaboration between government and private sectors, to provide necessary services, information, and to conduct other promotional activities for export promotion and import management. This organisation will function on commercial line. The composition and functions of this organisation will be stipulated separately. ˆ Top Annexure - 1 | Annexure - 2