Services Trade Services Trade Perspectives from NepalPerspectives from Nepal

hemant dabadihemant dabadi

South Asia Watch on Trade Economics & South Asia Watch on Trade Economics & EnvironmentEnvironment

ContentsContents

Importance of services in Importance of services in Nepal’s economy and tradeNepal’s economy and trade

Nepal’s commitments on Nepal’s commitments on Services in the accession Services in the accession processprocess

Issues of Nepal’s InterestIssues of Nepal’s Interest The Way ForwardThe Way Forward

Importance of services in Nepal’s economy Importance of services in Nepal’s economy and tradeand trade

Services contributing about two fifth Services contributing about two fifth (40%) of the GDP(40%) of the GDP

Share of services in the GDP growing Share of services in the GDP growing from about 30% in 1980 to over 40% in from about 30% in 1980 to over 40% in 2004/05 (there was a break in the growth 2004/05 (there was a break in the growth because the economy was suffering from because the economy was suffering from slow growth in recent past mainly slow growth in recent past mainly attributed to insurgencyattributed to insurgency

Share of Services still lower than in other Share of Services still lower than in other South Asian countriesSouth Asian countries

Services will witness higher rate of Services will witness higher rate of growth in future too growth in future too

Growth of services higher than growth of Growth of services higher than growth of agriculture and industryagriculture and industry

Importance of services in Nepal’s………, Importance of services in Nepal’s………, contd.contd.

Country/RegionCountry/Region AgricultureAgriculture IndustryIndustry ManufacturingManufacturing ServicesServices

19901990 20032003 19901990 20032003 19901990 20032003 19901990 20032003

BangladeshBangladesh 30 30 (2.1)(2.1)

22 22 (3.1)(3.1)

21 (6.0)21 (6.0) 26 26 (7.1)(7.1)

13 (5.2)13 (5.2) 16 (6.8)16 (6.8) 48 (3.8)48 (3.8) 52 52 (4.7)(4.7)

IndiaIndia 31 31 (3.1)(3.1)

22 22 (2.7)(2.7)

28 (6.9)28 (6.9) 27 27 (6.0)(6.0)

17 (7.4)17 (7.4) 16 (6.5)16 (6.5) 41 (6.9)41 (6.9) 51 51 (7.9)(7.9)

NepalNepal 52 52 (4.0)(4.0)

41 41 (2.8)(2.8)

16 (8.8)16 (8.8) 22 22 (6.0)(6.0)

6 (9.3)6 (9.3) 8 (6.7)8 (6.7) 32 (3.9)32 (3.9) 38 38 (5.5)(5.5)

PakistanPakistan 26 26 (4.0)(4.0)

23 23 (3.7)(3.7)

25 (7.7)25 (7.7) 23 23 (3.9)(3.9)

17 (8.1)17 (8.1) 16 (4.2)16 (4.2) 49 (6.8)49 (6.8) 53 53 (4.3)(4.3)

Sri LankaSri Lanka 26 26 (2.2)(2.2)

19 19 (1.5)(1.5)

26 (4.6)26 (4.6) 26 26 (5.8)(5.8)

15 (6.3)15 (6.3) 16 (6.6)16 (6.6) 48 (4.7)48 (4.7) 55 55 (5.3)(5.3)

ChinaChina 27 27 (5.9)(5.9)

15 15 (3.5)(3.5)

42 42 (11.1)(11.1)

52 52 (12.3)(12.3)

33 33 (10.8)(10.8)

39 (11.7)39 (11.7) 31 31 (13.5)(13.5)

33 33 (8.8)(8.8)

Low income Low income countriescountries

32 32 (2.8)(2.8)

24 24 (3.0)(3.0)

26 (4.6)26 (4.6) 27 27 (5.0)(5.0)

15 (6.1)15 (6.1) 14 (5.6)14 (5.6) 41 (5.1)41 (5.1) 49 49 (5.9)(5.9)

Middle income Middle income countriescountries

15 15 (3.6)(3.6)

10 10 (2.2)(2.2)

39 (2.6)39 (2.6) 36 36 (4.2)(4.2)

24 (4.0)24 (4.0) 22 (6.1)22 (6.1) 46 (3.1)46 (3.1) 54 54 (3.5)(3.5)

High income High income countriescountries

3 (1.8)3 (1.8) 2 (1.2)2 (1.2) 33 (3.0)33 (3.0) 27 27 (1.9)(1.9)

22 (--)22 (--) 18 (2.5)18 (2.5) 65 (3.4)65 (3.4) 71 71 (3.1)(3.1)

WorldWorld 5 (2.7)5 (2.7) 4 (1.9)4 (1.9) 34 (3.0)34 (3.0) 28 28 (2.3)(2.3)

22 (--)22 (--) 18 (3.2)18 (3.2) 61 (3.4)61 (3.4) 68 68 (3.2)(3.2)

Services exports above 10% of GDP (national bop Services exports above 10% of GDP (national bop statistics)statistics)

Commercial service exports increasing and as Commercial service exports increasing and as percent of GDP only second to Sri Lanka in the percent of GDP only second to Sri Lanka in the regionregion

Nepal’s export of commercial services as per cent of Nepal’s export of commercial services as per cent of GDP above the world average.GDP above the world average.

Nepal’s per capita commercial services export Nepal’s per capita commercial services export ($9.9) still low. World average $275 ($9.9) still low. World average $275

Travel related services dominating (about 66%) in Travel related services dominating (about 66%) in Nepal’s commercial service exportNepal’s commercial service export

Remittance very important source of foreign Remittance very important source of foreign exchange earningsexchange earnings

Poverty reduction percentage of people below Poverty reduction percentage of people below poverty line) from 42 to 31 % in 1993 – 2003 decade poverty line) from 42 to 31 % in 1993 – 2003 decade attributed to remittancesattributed to remittances

Importance of services in Nepal’s………, contd.Importance of services in Nepal’s………, contd.

Country/RegionCountry/Region Commercial Commercial Service Exports Service Exports

($ million)($ million)

Population Population (million)(million)

Commercial Commercial service exportservice export

(Per capita)(Per capita)

BangladeshBangladesh 398398 138.1138.1 2.882.88

IndiaIndia 2504325043 1064.41064.4 23.5323.53

NepalNepal 302302 24.724.7 12.2312.23

PakistanPakistan 14751475 148.4148.4 9.949.94

Sri LankaSri Lanka 13861386 19.219.2 72.1972.19

ChinaChina 4637546375 1288.41288.4 3636

Low Income Low Income countriescountries

3267132671 2311.92311.914.1314.13

Middle Income Middle Income countriescountries

268567268567 2988.62988.6

89.8689.86

High Income High Income countriescountries

14278941427894 972.1972.11468.881468.88

WorldWorld 17291321729132 6272.56272.5 275.67275.67

Importance of services in Nepal’s………, Importance of services in Nepal’s………, contd.contd.

Country/Country/RegionRegion

TransportTransport TravelTravel Insurance & Insurance & financial financial servicesservices

Computer, Computer, informationinformation

, , communicacommunications, and tions, and

other other commercial commercial

servicesservices

19901990 20032003 19901990 20032003 19901990 20032003 19901990 20020033

BangladeshBangladesh 12.912.9 18.118.1 6.46.4 14.314.3 0.10.1 8.18.1 80.680.6 59.559.5

IndiaIndia 20.820.8 10.910.9 33.833.8 12.512.5 2.72.7 1.51.5 42.742.7 75.175.1

NepalNepal 3.63.6 11.911.9 65.665.6 65.965.9 ---- 0.20.2 30.830.8 2222

PakistanPakistan 59.359.3 56.756.7 1212 8.18.1 1.41.4 2.32.3 27.327.3 32.832.8

Sri LankaSri Lanka 39.739.7 40.540.5 30.230.2 30.630.6 4.24.2 3.53.5 25.925.9 25.425.4

ChinaChina 47.147.1 17.017.0 30.230.2 37.537.5 3.93.9 1.01.0 18.718.7 44.444.4

Low income Low income countriescountries

29.229.2 16.316.3 28.428.4 19.719.7 2.52.5 1.81.8 40.340.3 62.462.4

Middle Middle income income countriescountries

27.027.0 24.124.1 45.445.4 46.946.9 3.23.2 2.62.6 25.025.0 26.526.5

High income High income countriescountries

26.526.5 22.122.1 33.833.8 26.726.7 7.17.1 10.010.0 32.932.9 41.741.7

WorldWorld 26.626.6 22.522.5 35.235.2 30.230.2 6.66.6 8.78.7 32.132.1 38.838.8

Importance of services in Nepal’s………, Importance of services in Nepal’s………, contd.contd.

General commitmentsGeneral commitments• No limit in cross border supplyNo limit in cross border supply

• Limit of us $ 2000 per annum for Limit of us $ 2000 per annum for Nepalis going abroadNepalis going abroad

• Condition for existing foreign supplier Condition for existing foreign supplier not to be morenot to be more restrictive than they restrictive than they exist at the time of Nepal’s accession exist at the time of Nepal’s accession to WTOto WTO

• movement of natural person kept movement of natural person kept unbound or restrictive except in the unbound or restrictive except in the categories of services sales persons, categories of services sales persons, persons responsible for setting up a persons responsible for setting up a commercial presence, and intra-commercial presence, and intra-corporate transferees corporate transferees

Nepal’s commitments in ServicesNepal’s commitments in Services

General commitmentsGeneral commitments• No limitation on national treatment for No limitation on national treatment for

commercial presence exceptcommercial presence except Prior approval from Department of Industry Prior approval from Department of Industry

for Foreign investmentfor Foreign investment Foreign forms can be barred from incentives Foreign forms can be barred from incentives

and subsidies provided only to wholly nepali and subsidies provided only to wholly nepali owned firms and companiesowned firms and companies

• Decision on foreign investment to be Decision on foreign investment to be provided within 30 daysprovided within 30 days

• Repatriation of profits and devidends, Repatriation of profits and devidends, royalties, loans and interest, proceeds royalties, loans and interest, proceeds from sales of equity allowed , from sales of equity allowed ,

Nepal’s commitments in ServicesNepal’s commitments in Services

Specific commitments (Mostly based on limit on Specific commitments (Mostly based on limit on foreign equity participation under mode)foreign equity participation under mode)

• Up to 51% in accounting, auditing; Up to 51% in accounting, auditing; veterinary services; research and veterinary services; research and development; rental/leasing without development; rental/leasing without operators; market research; management operators; market research; management consulting; technical testing; packaging; consulting; technical testing; packaging; printing and publishing; convention; general printing and publishing; convention; general construction work for civil engineering; construction work for civil engineering; distribution services; franchising; higher, distribution services; franchising; higher, adult and other education; sewage, refuse adult and other education; sewage, refuse disposal; hospital; tourism (travel agency disposal; hospital; tourism (travel agency and tour operators); cinema theatre and tour operators); cinema theatre including cinema projection services (in including cinema projection services (in some cases the percentage to be increasd some cases the percentage to be increasd after 5 years)after 5 years)

Nepal’s commitments in ServicesNepal’s commitments in Services

Specific committmentsSpecific committments• Up to 67% in architectural services; Up to 67% in architectural services;

engineering services; integrated engineering services; integrated engineering services; urban planning and engineering services; urban planning and landscaping; advertising services; and landscaping; advertising services; and financial services financial services

• Up to 80% in computer and related services; Up to 80% in computer and related services; courier services; basic telecommunications; courier services; basic telecommunications; mobile telecommunications services; value mobile telecommunications services; value added telecommunications; wholesale trade added telecommunications; wholesale trade services of radio and television equipment, services of radio and television equipment, musical instruments, and records, music musical instruments, and records, music scores and tapes; hotel and lodging (star scores and tapes; hotel and lodging (star hotels only) and graded restaurantshotels only) and graded restaurants

• Minimum investment prescribed($1million in Minimum investment prescribed($1million in cinema projection)cinema projection)

Nepal’s commitments in ServicesNepal’s commitments in Services

Ongoing WTO negotiations and issues of Ongoing WTO negotiations and issues of Nepal’s interestNepal’s interest

Nepal not required to make additional Nepal not required to make additional commitmentcommitment

Effective implementation of Modalities Effective implementation of Modalities for the Special Treatment for LDC for the Special Treatment for LDC Members in Negotiations on Trade in Members in Negotiations on Trade in Services, particularly related to mode 4.Services, particularly related to mode 4.

Additional and commercially meaningful Additional and commercially meaningful commitments in initial and revised offers, commitments in initial and revised offers, particularly under mode 4particularly under mode 4..

De-linked mode 4 offers from Mode 3.De-linked mode 4 offers from Mode 3. Elimination of pre-employment Elimination of pre-employment

conditions, ENTs / LMTs.conditions, ENTs / LMTs.

Ongoing WTO negotiations and issues of Ongoing WTO negotiations and issues of Nepal’s interestNepal’s interest

Qualification requirements and recognition.Qualification requirements and recognition. Quota restrictions on visas (GATS Visa), and Quota restrictions on visas (GATS Visa), and

restriction on duration of stay.restriction on duration of stay. Immigration and security issues.Immigration and security issues. Discriminatory tax treatment (so called social Discriminatory tax treatment (so called social

security payments)security payments) Minimum wage Issue (comparative advantage Minimum wage Issue (comparative advantage

is lossed)is lossed) Issues of social security (social dumping- Issues of social security (social dumping-

exploitation of foreign workers and increase exploitation of foreign workers and increase unemployment at destination country).unemployment at destination country).

Movement of low and semi-skilled persons.Movement of low and semi-skilled persons.

The Way ForwardThe Way Forward

Effective and skillful participation in Effective and skillful participation in on-going WTO negotiations to seize on-going WTO negotiations to seize the opportunities unlocked by WTO the opportunities unlocked by WTO membershipmembership

Identification of sectors/sub-sectors Identification of sectors/sub-sectors of Nepal’s comparative advantage of Nepal’s comparative advantage and export interest and export interest

Identification of countries where Identification of countries where Nepal can supply services personsNepal can supply services persons

Human resource development as per Human resource development as per the requirements of identified the requirements of identified sectors/sub-sectors and countries.sectors/sub-sectors and countries.

The Way ForwardThe Way Forward Establishment of appropriate institutions to Establishment of appropriate institutions to

finance education and human resource finance education and human resource developmentdevelopment

Establishment of an institutional mechanism Establishment of an institutional mechanism that assists in the overseas job search, in that assists in the overseas job search, in visa preparation, and in travel visa preparation, and in travel arrangementsarrangements

Increase participation of professional Increase participation of professional organizationsorganizations

Alignment with developing countries and Alignment with developing countries and LDC group to raise voices in WTO forums LDC group to raise voices in WTO forums are necessary to seize the benefits of are necessary to seize the benefits of services trade liberalization under mode 4services trade liberalization under mode 4

Thank You Very Much.Thank You Very Much.