Services Trade Perspectives from Nepal

1. Services Trade Perspectives from Nepal hemant dabadi South Asia Watch on Trade Economics & Environment

2. Contents Importance of services in Nepal’s economy and trade Nepal’s commitments on Services in the accession process Issues of Nepal’s Interest The Way Forward

3. Importance of services in Nepal’s economy and trade • Services contributing about two fifth (40%) of the GDP • Share of services in the GDP growing from about 30% in 1980 to over 40% in 2004/05 (there was a break in the growth because the economy was suffering from slow growth in recent past mainly attributed to insurgency • Share of Services still lower than in other South Asian countries • Services will witness higher rate of growth in future too • Growth of services higher than growth of agriculture and industry

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

5. Importance of services in Nepal’s………, contd. • Services exports above 10% of GDP (national bop statistics) • Commercial service exports increasing and as percent of GDP only second to Sri Lanka in the region • Nepal’s export of commercial services as per cent of GDP above the world average. • Nepal’s per capita commercial services export ($9.9) still low. World average $275 • Travel related services dominating (about 66%) in Nepal’s commercial service export • Remittance very important source of foreign exchange earnings • Poverty reduction percentage of people below poverty line) from 42 to 31 % in 1993 – 2003 decade attributed to remittances

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

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

8. Nepal’s commitments in Services • General commitments • No limit in cross border supply • Limit of us $ 2000 per annum for Nepalis going abroad • Condition for existing foreign supplier not to be morerestrictive than they exist at the time of Nepal’s accession to WTO • movement of natural person kept unbound or restrictive except in the categories of services sales persons, persons responsible for setting up a commercial presence, and intra-corporate transferees

9. Nepal’s commitments in Services • General commitments • No limitation on national treatment for commercial presence except • Prior approval from Department of Industry for Foreign investment • Foreign forms can be barred from incentives and subsidies provided only to wholly nepali owned firms and companies • Decision on foreign investment to be provided within 30 days • Repatriation of profits and devidends, royalties, loans and interest, proceeds from sales of equity allowed ,

10. Nepal’s commitments in Services Specific commitments (Mostly based on limit on foreign equity participation under mode) • Up to 51% in accounting, auditing; veterinary services; research and development; rental/leasing without operators; market research; management consulting; technical testing; packaging; printing and publishing; convention; general construction work for civil engineering; distribution services; franchising; higher, adult and other education; sewage, refuse disposal; hospital; tourism (travel agency and tour operators); cinema theatre including cinema projection services (in some cases the percentage to be increasd after 5 years)

11. Nepal’s commitments in Services • Specific committments • Up to 67% in architectural services; engineering services; integrated engineering services; urban planning and landscaping; advertising services; and financial services • Up to 80% in computer and related services; courier services; basic telecommunications; mobile telecommunications services; value added telecommunications; wholesale trade services of radio and television equipment, musical instruments, and records, music scores and tapes; hotel and lodging (star hotels only) and graded restaurants • Minimum investment prescribed($1million in cinema projection)

12. Ongoing WTO negotiations and issues of Nepal’s interest • Nepal not required to make additional commitment • Effective implementation of Modalities for the Special Treatment for LDC Members in Negotiations on Trade in Services, particularly related to mode 4. • Additional and commercially meaningful commitments in initial and revised offers, particularly under mode 4. • De-linked mode 4 offers from Mode 3. • Elimination of pre-employment conditions, ENTs / LMTs.

13. Ongoing WTO negotiations and issues of Nepal’s interest • Qualification requirements and recognition. • Quota restrictions on visas (GATS Visa), and restriction on duration of stay. • Immigration and security issues. • Discriminatory tax treatment (so called social security payments) • Minimum wage Issue (comparative advantage is lossed) • Issues of social security (social dumping- exploitation of foreign workers and increase unemployment at destination country). • Movement of low and semi-skilled persons.

14. The Way Forward • Effective and skillful participation in on-going WTO negotiations to seize the opportunities unlocked by WTO membership • Identification of sectors/sub-sectors of Nepal’s comparative advantage and export interest • Identification of countries where Nepal can supply services persons • Human resource development as per the requirements of identified sectors/sub-sectors and countries.

15. The Way Forward • Establishment of appropriate institutions to finance education and human resource development • Establishment of an institutional mechanism that assists in the overseas job search, in visa preparation, and in travel arrangements • Increase participation of professional organizations • Alignment with developing countries and LDC group to raise voices in WTO forums are necessary to seize the benefits of services trade liberalization under mode 4

16. Thank You Very Much.