WTO flags Nepal’s weak manufacturing base and narrow export markets

Nepal continues to grapple with poor infrastructure, high trade costs, weak production capacity, and limited export diversification, despite modernising customs and introducing policy reforms to attract investment, a recent review by the World Trade Organisation says. According to the WTO Secretariat’s Trade Policy Review of Nepal, the country’s manufacturing sector contributes just 4.9 percent to gross domestic product, while around 68 percent of merchandise exports go to India.

This points to Nepal’s heavy dependence on a single export market. Although merchandise exports increased from $860 million in fiscal year 2018-19 to $1.5 billion in 2023, there has been little progress in diversifying export products and destinations, the report says.

The review also pointed to gaps in implementing trade facilitation measures. Only 13 percent of customs declarations are processed through the green channel, while 42 percent still go through the red channel, which requires physical inspection.