The Sixth Nepal-Pakistan Joint Economic Commission (JEC) began in Islamabad recently wherein both sides agreed to extend cooperation in fields of energy, agriculture, telecommunication, health, education and textile. Pakistan and Nepal have also agreed to expand the areas of cooperation in economic and cultural fronts. Despite an extensive 1982 trade agreement, the volume of bilateral trade between Nepal and Pakistan remains comparatively small. Both countries have in the past few years have stepped up efforts to promote bilateral trade, especially in textiles, extraction of oil and tourism. Pakistan also offered a $5 million credit to Nepal. Nepal and Pakistan are signatories to the South Asia Free Trade Agreement (SAFTA) and members of the South Asian Economic Union.
Trade relations between the two countries used to be comparatively high during the 1990s, but they started decreasing primarily due to transit difficulties. So, problems regarding this should be solved bilaterally and through the help of the transit providing countries.
During former Premier Saukat Aziz’s visit to Nepal, it was agreed that the experience of Pakistan in electrical transmission lines would be shared with Nepal. Pakistan had also agreed to provide duty free access to herbs, coffee, orthodox tea, large cardamom and vegetables.
Immediately after that, the volume of tea exports was phenomenal. But we have not been able to maintain that momentum in the current years. Pakistan’s Finance minister Senator Ishaq Dar while addressing the Sixth JEC meeting reiterated that JEC would certainly offer an opportunity to both countries to move forward together in the fields of trade, agriculture, education, energy, information technology and other sectors where both countries have comparative advantages. He further said “Pakistan is mindful of the fact that existing cordial and friendly relations between Pakistan and Nepal can be further translated into substantial economic and commercial cooperation. This forum can help in harnessing the true potential of mutual trade. There exist enormous opportunities for bilateral investment and joint ventures through public-public and public private partnerships.
Pakistan is keen to enhance its existing friendly ties with Nepal for exploring new avenues for cooperation in commercial and economic fields for mutual benefit of Nepal and Pakistan.
Speaking on the occasion, Nepalese Minister for Finance, Shankar Prasad Koirala, said there is a good scope of promoting trade and economic cooperation between the two countries. Cooperation in the fields, such as, agriculture tourism, education and culture, health, textiles and leather industries would contribute in the economic development and prosperity of our people. Nepal has emerged as one of the finest Pashmina producers. We do see potentials that our agriculture products like cardamom, tea, coffee, medicinal herbs can find a reasonable space in Pakistani market.
He appreciated the Government of Pakistan’s decision to allow duty free access of Nepalese tea in Pakistan, and hoped this would find continuity with commensurate simplification of procedure at the Karachi port. Though our bilateral trade volume is small, he said, still Nepal has significant trade deficit with Pakistan. We need to improve the trade environment between the two countries, by reforming both tariff and non-tariff barriers and preferential cargo tariffs.
Nepal’s finance minister said that despite challenges the economy is growing steadily.
“We expect the growth rate in current year will boost to 5.5 percent. Mostly the macroeconomic indicators are at satisfactory level,” he said.
“There have been good institutional linkages between the private sectors of Nepal and Pakistan which need to be revitalized. Frequent exchange of business delegations, organization of trade and tourism fairs in both the countries, and collaboration between the two private sectors would give added impetus to the promotion of trade and commerce. Nepal has given special emphasis on the public-private partnership for economic development of the country where private sector can play a lead role”.
Talking about the country’s economic situation, in a recent Nepal–Pakistan JEC meeting, the Finance Minister of Pakistan has said that Pakistan has been able to maintain a reasonable growth trajectory despite internal and external challenges such as the war against terror, severe energy crises and phenomenal surge in commodity prices over the last few years. The economy on average grew since 2008-09 at around 3%. Pakistan has fixed a GDP growth target of 4-5% during the next financial year. Pakistan has been witnessing improvement in foreign investor’s confidence on the policies of the new government.
As is evident that post-2013 election, the capital market crossed 23,000 plus points emitting positive signals to investor’s confidences. There is certainly a need for taking concrete measures for increasing and diversifying bilateral trade and we are quite optimistic that the conclusion of Free Trade Agreement will open new vistas in promoting our trade.
Nepal has signed several agreements with Pakistan in various fields, the latest being the agreement to cooperate in the field of agriculture. The help should speed up the process of commercializing agriculture. Nepal is of the belief that the early implementation of SAFTA would reduce our dependence on one country.
There’s a lot to do in boosting trade between the two countries from both the private and public sectors. At the private sector level, regular visits by trade delegations would help immensely in doing so.
Similarly, participation in and organization of trade fairs and exhibitions will also help augment the trade and economic relations.
Nepal is the major importer of dry fruits, including dates (Choda), from Pakistan. So efforts must be taken to explore the possibility of importing commodities from Pakistan as well.
There is great potential for exporting large volumes of Nepalese products like herbs, essential oils, large cardamom, pulses, pashmina and silk products, cut flowers, lettuce, tea, raw hides and skins to Pakistan. But due to the high tariff and transit cost, Nepal was not able to explore this opportunity quite effectively in the past. It is against this backdrop that Nepali exporters are requesting the Pakistani government to reconsider the tariffs for Nepalese products to enter their market.
Similarly, air freight or more economical cargo rates for transportation of commodities between the two countries should be facilitated. Though the flight of PIA has resumed, Nepalese exporters are not able to export low weight high value commodities because of the high air-freight. So, the private sector strongly believes that the air-freight should be reduced in order for Nepalese products to be competitive.
In the case of Nepal-Pakistan joint ventures, opportunity exists in the areas of textiles, cotton towels, pharmaceutical products, construction works, herbs and tourism. The success of Himalayan Bank is a vivid example of Nepal-Pakistani joint venture. As regards the learning from the Pakistani SEZ, Nepal can avail the expert opinion and onsite visit to the SEZ in Pakistan.
Apart from these, enhancing SAARC, providing training to the Nepali work force, promoting joint ventures, providing a leading role to the private sector are also issues of common concern. Promotion of tourism in both the countries could benefit both nations.
A fairly large number of students go to Pakistan to pursue their studies in professional colleges. In the recent past, the Government of Nepal has requested the Pakistani Government to increase the number of scholarships in engineering, medicine, sociology, journalism and international trade. Apart from economic ties between the two countries, both the countries should also encourage cultural and social relations as Nepal and Pakistan share common ground and common vibes. It has been a long time since a number of films were made as joint ventures. Since Nepal has made quite a bit of progress in the cinema sector, there is an opportunity for both the countries to join hands again. Pakistani Qawalis and Gajals are very popular in Nepal, and in the past decade, some joint venture films were made in Pakistan with Nepali investors and actors. Possibilities of these should also be explored.
Since the adoption of SAFTA, a lot of opportunities and challenges are there. Due to Nepal’s particular geographical and least developed status, the factor should be taken into account with respect to the Rules of Origin, Revenue Loss Compensation, Sensitive List and the like.