International Trade has its own laws, regulations and institutions. Country regulate the conduct of international trade. But the different countries have different policy. This creates the difficulties in cross border trade. Rate of exchange , Indian’s trade policy, transit, land-lock structure and micro level difficulties are the main difficulties of International trade of Nepal.
Rate Of Exchange
At context of Nepal the foreign rate of exchange also creates difficulty in international trade. The rate of exchange of Nepal is fixed with Indian currency but is variable to others country. The rate of exchange of Nepalese currency is depends up on the Indian currency. Therefore, Nepal has to fix the rate of exchange by evaluating the Indian currency.Land-locked countries may face the difficulty on transit. The import/export documentation, custom clearancee increases the time and cost. This increases the prize of product in market. hand-knotted woolen ca and other chargrpet and Pashmina have high image in foreign market. But other products have not such type of image because of quality. All product of Nepal are not fulfilling the criteria of international trade standard. The qualities of many Nepalese products are very low. So they are no acceptable for foreign customer. Therefore the quality of Nepalese product also creating a difficulty is cross border trade.
International Trade Aspect
Indian’s trade policy
India’s trade policy and practices are also affecting Nepal’s international trade. It has been experienced over the years that India imposes multiplicity of restrictions on imports from Nepal. And exercise monopoly by levying extra freight charges and cumbersome customs transit declaration procedures for the Nepalese exports to the third countries.
Transit has always been as difficulty of Nepal. Its land-locked position makes itself dependent on its neighbors of access to sea. Nepal has made transit agreements with India and Bangladesh to use their territory for its access to sea. However, Calcutta port is the most dependable port for Nepal’s import and export. It is also nearest port from Nepal (1127km)/ Pakistan has also given an authority to use Karachi port for Nepalese cargo onward transportation to third country. Bangladesh is also provided the transit facility to Nepal for third country trade via Khulna and Chittagong ports. Because of the passport and visa formalities and logistic problem, ports of Pakistan and Bangladesh are not perfectly use.
The land-locked structure of country, complicated administrative problem and geographical structure of country creating difficulties in cross border trade. The new issue is difficult to keep the actual statistics of trade. Due to open border system between Nepal and India the actual data of trade cannot be calculated. Therefore, it directly effect on GDP of country.
Micro Level Difficulites
The micro level difficulties are like long rung difficulties. The micro-level difficulties are very important in long run phase. These difficulties are also called unseen difficulties. It is necessary to identify the markets that may import Nepalese product. It may possible by study and research. The lunching of product without market research is creating difficulty for Nepalese trade in international sector.
Global competition position of Nepal is also very low. According to research report of Center for Economic Development and Administration Research (CEDA) of Tribhuvan University; Nepal was in 125th position out of 130 countries. The report was prepared on the basis of Adam Smith’s principle of labor distribution physical capital and infrastructure of neo-capitalism, education and training, economic stability, good-governance, market management and other four principles.
A report of Transparency International (TI) has shown Nepal as the most corrupt country in South Asia. TI’s anti-corruption index for year 2009 released Friday lists Nepal as 143rd corruption-free country in the world. There are 180 countries in the list. Nepal slipped five notches below last year’s position of 138th corruption-free country in the world. The report shows New Zealand as the least corrupt country and Somalia as the most corrupt in the world. In South Asia, Nepal is the most corrupt country while Bhutan is the least corrupt, according to the TI report. These types of corruption decrease the internal economic capacity of country. The main site of corruption in Nepal is in government offices. Those type of internal corruptions decreasing the economic capacity of Nepal and making Nepal weaker. Which directly effect on foreign trade? It also creates the difficulty in international trade of Nepal.
Human development index measures a country’s average achievements in three basic aspects of human development: longevity, Knowledge, and a decent standard of living. Longevity is measured by life expectancy at birth; knowledge is measured by a combination of the adult literacy rate and the combined primary, secondary, and tertiary gross enrollment ratio; and standard of living is measured by GDP per capital. According to the UNDP Human Development Report Nepal has very low HDI and which is third least in south Asia.
By conclusion, Nepal is facing difficulties in international trade difficulties because of land-locked geographic structure, transportation, foreign trade policy, rate of exchange, and poor quality of Nepalese product, international market resections, lack of research regulatory mechanism and black monetary transactions. International trade of Nepal directly depends upon Human Development Index, Internal corruption, Nepal’s Global competitive position and Political Instability of Nepal.