The Major Problems of Nepal’s Foreign Trade

Explain the major problems of Nepalese foreign trade.

The major problems of Nepal’s foreign trade are as follows:

1. Landlockedness: Nepal is a landlocked country. It is bordered by India from three sides: east, west, and south and by China from the north. Therefore, Nepal has no direct access to the sea and it has no seaport. Goods are to be exported to different countries either using the land of India or through air transportation. Both of these are very expensive. This is regarded as the major problem of Nepalese foreign trade. Moreover, open border with India is also a problem of Nepalese foreign trade because it is encouraging illegal trade between Nepal and India.
2. Low export and high import: The production of exportable commodities is very limited in Nepal. There are very few goods which Nepal has been exporting such as woollen carpets, ready-made garments. handicrafts, herbs and shrubs, tea, coffee, etc. But the export of these goods is declining in recent years. On the other hand, Nepal’s import is very high in comparison to export. Nepal imports almost all the goods from other countries. Because of this reason, Nepal’s trade deficit is increasing rapidly every year, which is one of the major problems of Nepalese foreign trade.
3. Low-quality goods: The goods produced in Nepal are of low quality because of the use of inferior inputs and backward technology. Such goods cannot compete with foreign products. Therefore, it is very difficult to sell these goods in the international market. To sell goods in the international market, they should be of higher quality. Hence, the production of low-quality goods is also a problem of Nepalese foreign trade.
4. Improper trade policy: Before the 1990s, the Government of Nepal had adopted import substitution and protectionism policy. But after the 1990s, the Government of Nepal adopted a liberal trade policy. But this trade policy does not seem favourable to Nepal. After the adoption of this trade policy, there is an uncontrolled flow of foreign goods into Nepal. Consequently, Nepal’s trade deficit is increasing, which is one of the major problems of Nepalese foreign trade.
5. High cost of production: The cost of production in Nepal is very high in comparison to our neighbouring countries: India and China. The causes behind the high cost of production in Nepal are the use of primitive technology, inefficient labour, imported raw materials, inefficient equipment, etc. Such products cannot compete with the products of other countries in terms of price and quality. This is also a problem of Nepalese foreign trade.