Even though China reopened the Kerung-Rasuwagadhi border point for Nepal’s exports on December 28 last year, the Chinese authorities have continued to impose certain restrictions on the export of Nepali goods.
The Chinese side has imposed a quota on shipments and the goods are not allowed to be imported from Nepal on a daily basis. “Imports of Nepali goods into China are allowed once in 15 days,” said an official at the Department of Customs (DoC) who wished not to be named. “Only 10 trucks of Nepali goods are allowed to pass through the border point to China at a time. It means Nepal can export only 20 trucks of goods in a month.”
Since the reopening of the Kerung-Rasuwagadhi border point in late December, goods like handicrafts, bamboo items, Nepali handmade papers and carpets have been exported to China. According to the DoC official, the Chinese side has not allowed the import of food items. “Before the closure of the Nepal-China border in early 2020 prior to the Covid-19 pandemic, products like wheat flour, ghee and noodles used to be exported through this border point.
Nepali officials are unaware of why China has continued to impose restrictions on shipments and import of food items from Nepal. Though most of the trade between Nepal and China takes place through the sea route, a significant portion of the bilateral trade used to take place also through the land routes. In January 2020, China stopped both the export and import of goods through the land border points. Though the border points including Rasuwagadhi and Tatopani were reopened for one-way traffic of goods from China to Nepal, they remained closed for exports of goods Nepali goods. As a result, Nepal’s exports to China suffered badly leading to a widened trade deficit with China.
For instance, Nepal’s exports to China in the last fiscal year 2021/22 stood at just Rs 808 million, a drop from Rs 2.1 billion in FY 2018/19. Meanwhile, imports from China grew to Rs 264.78 billion in FY 2021/22 from Rs 205.51 billion in FY 2018/19, according to DoC statistics.
“The closure of borders has cost dearly to Nepal’s exports to China as the majority of such exports take place through land routes,” Purusottam Ojha, former Secretary of Commerce, told Annapurna Express in early January.
Now, the Kerung-Rasuwagadhi border has been reopened for limited exports of Nepali goods while the Tatopani-Khasa border point is yet to be reopened for bilateral trade activities.
“Irrespective of certain restrictions, a door has reopened for Nepal’s exports which is a positive development,” said Amrit Khadka, General manager of Federation of Export Entrepreneurs Nepal (FEEN). “It is a stepping stone in the resumption of Nepal-China trade, and we hope China will abolish all restrictions and normalize the trade through the border points as the northern neighbor has been removing the Covid-19 restrictions.”
According to him, though Nepal has the option of exporting goods through the sea route and air routes to China, it is easier to export goods that are mostly consumed in the Tibet region. “Bottled water, noodles and grasses for cattle feeding used to be exported to China before the import ban was imposed in early 2020,” he said. He expressed hope that China would reopen the other border points including Tatopani-Khasa for Nepal’s exports.
A Chinese embassy official in early January had said that more two-way trade routes will be opened in 2023. “The two-way trade at the Pulan/Yari port will resume in early 2023. This will provide an opportunity for Nepali exporters to export more goods to China,” said Wang Xin, Charge de Affaires of the Chinese Embassy in Kathmandu, addressing the inauguration program of Pokhara Regional International Airport on January 1.
Amid restrictive measures against Nepal’s exports through the border points, the ratio of exports to China compared to imports from the northern neighbor plunged to just 0.3 percent in the last FY 2021/22 from as high as one percent in FY 2018/19. This ratio was 3.1 percent in FY 2013/14 when Nepal exported goods worth Rs 2.84 billion to China.
Trade expert Ojha told the Annapurna Express that Nepal’s exports to China compared to imports have continued to remain insignificant and border closure for exports hit even the limited exports to China. “With the reopening of the Rasuwagadhi border for exports, there is the scope for growth in exports particularly in the Tibet region of China,” he said, adding, “However, Nepal will not be able to grow exports to China until quarantine and infrastructure-related bottlenecks are resolved.”
According to the Nepal Trade Information Portal of the Ministry of Industry, Commerce, and Supplies, China has been providing zero tariff facilities for about 8,000 goods originating in Nepal. Nepal is yet to take advantage of the Chinese market as the country does not produce niche products that can be sold in the Chinese market.
As much as 95 percent of Nepal’s total exports to China are these products. Exporters must meet certain rules of origin requirements for their products in order to be eligible for China’s zero-tariff facilities. Despite having such a facility, Nepal has been unable to take advantage of it and increase exports.
The northern neighbor promised to offer duty-free treatment to items of Nepali origin spanning 98 percent of tariff lines during the Nepal visit of Former Chinese Foreign Minister Wang Yi in April last year.
In its Nepal Development Update Report published in April 2021, the World Bank noted that Nepal has the ability to increase exports by a factor of 12 over its current annual exports, with China holding the greatest potential for growth. The unrealized export potential is referred to as “missing exports” by the multilateral organization. According to the report, China accounts for $2.2bn of Nepal’s “missing exports,” followed by India ($1.2bn), the United States ($800m), and Japan ($700m).
Original article @ The Annapurna Express
