Nepal and China share a long history of economic, cultural, and people-to-people exchanges. Over the years, we have built strong ties based on mutual respect, trust, and understanding. Our relations, which are based on the five principles of peaceful co-existence, have always remained cordial and friendly. This relationship has deepened over the years through regular exchanges of high-level visits.
Nepal is firmly committed to the One-China policy. It has been our consistent policy to not allow our soil to be used against our neighbors. Cooperation between our two countries has expanded in various fields. China has been providing generous support in our development efforts. Nepal-China trade relations date back to ancient times. It began with the engagement of merchants from both sides of the Himalayas which continues today in a much more expanded form of trade and exchanges.
Mutual recognition of standards and accreditation will help promote our exports. While talking about Nepal’s trade and investment potentials, let me briefly outline some of the top priorities of this government. Following the successful holding of the elections of all tiers, we have entered into the second cycle of democratically elected government under the federal system.
China remains Nepal’s second-largest trading partner. Currently, more than 14 percent of our total international trade is with China. Similarly, China is the largest source of foreign direct investment in Nepal. We believe that phenomenal economic progress achieved by our neighbors would open up wider avenues of opportunity for Nepal to grow and prosper through the expansion of export trade and enhanced level of inward investment. We expect easy and more generous market access to our products in the vast markets of our neighbors.
Mutual recognition of standards and accreditation will help promote our exports. While talking about Nepal’s trade and investment potentials, let me briefly outline some of the top priorities of this government. Following the successful holding of the elections of all tiers, we have entered into the second cycle of democratically elected government under the federal system. We are aware that foreign investment requires a stable political environment. Now, we are in a position to assure you of the continuity and stability in policy.
The present government is firmly committed to delivering the economic dividends of democracy to the people. For that, it has a clear vision and strategy, strong commitment, and strong support of the people. Our objective is to translate the people’s aspirations for peace, stability, and prosperity into reality. Nepal has been pursuing a business and investment-friendly policy. We have made major reforms in our investment regime that encourages, promote and protect the foreign direct investment. Our tax slabs are one of the lowest and our position is fairly good in ease of doing business. Investment in any sector is profitable in our country given the nascent stage of our industrial development. Profitable areas of investment include hydropower, industrial manufacturing, infrastructure development, tourism, agriculture, minerals, and mining, among others.
Our laws permit full repatriation of income earned from investment. Foreign companies registered in Nepal can purchase, own and sell land. No discrimination is made between national and foreign investors. There is no policy of nationalization of private industry. The other factor that makes a business competitive in Nepal is the availability of a less expensive workforce, reformed labor laws, and improved industrial relations. We are seriously working on further simplifying the procedures and fully operationalizing the one-stop service.
Necessary rules are being developed for the automatic approval of FDI as well. As you all know that Nepal aspires to become a middle-income country by 2030 and graduate from LDC status by the end of 2026. We need significant investments in infrastructure development and maximize utilization of technology to meet these targets. We count on Chinese investment in filling our financial and technological gaps in our priority areas. We stand ready to offer all legitimate assistance to Chinese companies interested in investing in Nepal.
Cross-border connectivity is vital for enhancing economic partnerships. Realizing this, the Government of Nepal has been giving priority to improving infrastructure at the Nepal-China border, establishing a fully equipped laboratory for testing and accreditation at the border points, expediting the construction of port facilities in Nechung- Lizi, Purang- Yari, and Kimathanka- Chentang on the Nepal side.
After the painful period of the COVID pandemic, our economy is recovering gradually. However, challenges still persist. The tourism sector suffered a lot during the pandemic. We welcome Chinese tourists to Nepal as China lifts the restrictions on outward mobility. China’s listing of Nepal as a priority destination for Chinese tourists will have a salutary impact on our tourism industry. There exist various bilateral mechanisms between our two governments as well as in the non-governmental sector. We have signed agreements and MOUs on trade, investment, tourism, and others.
Ever-growing people-to-people contacts is yet another feature of our increasing engagement. Considering all these facts, I see great potential for an enhanced level of economic engagement. Our two governments have been discussing the establishment of cross-border economic zones and the opening of more border trading points. Our two countries are already linked by optical fiber and the prospects of cross-border railways and transmission lines will help significantly improve our economic ties in the coming years.
Nepal’s growing trade deficit with China and the apparent gaps in commitment and actual investment of FDI from China are some of the issues that a forum like this should try to address with a practical solution. Nepal imported goods worth about Rs 232 billion from China during the fiscal year 2021-22 whereas our exports were at meagre Rs 0.67 billion during the same period. The private sectors of the two countries can play an important role in fostering business and investment opportunities, taking advantage of the conducive policy regime in Nepal.
Cross-border connectivity is vital for enhancing economic partnerships. Realizing this, the Government of Nepal has been giving priority to improving infrastructure at the Nepal-China border, establishing a fully equipped laboratory for testing and accreditation at the border points, expediting the construction of port facilities in Nechung- Lizi, Purang- Yari, and Kimathanka- Chentang on the Nepal side. We have also requested the Chinese side to help enhance productive capacity in a range of products of our comparative advantage and enlist vegetables, meat products, tea, and herbal products in the General Administration of Customs of China (GACC). We have also requested the Chinese side to include some 512 tradable Nepali products in the list of Duty-Free Quota Free facilities on a preferential basis. These measures will be important to reduce Nepal’s trade deficit.
Trade is the engine of growth and our future prosperity lies in our capacity to produce and trade more. This forum is timely and important. Interaction between the two business communities provides an opportunity to explore further avenues of trade and investment. We are happy to see the private sectors of Nepal and China have engaged in exploring mutually beneficial business opportunities. We are happy to receive high-level business delegation from our close, friendly neighbor, China. I believe this forum provides an excellent opportunity to strengthen existing business ties and explore new areas of economic and business partnership between Nepal and China.
The Confederation of Nepalese Industries (CNI) and China Council for the promotion of International Trade (CCPIT) deserve our appreciation for taking timely initiative in hosting this important event.
(This article is based on the Keynote speech by Prime Minister Pushpa Kamal Dahal at the Nepal-China Business Forum organized by the CNI on 14 March in Kathmandu)