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

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

Importance of services in Nepal’s economy and trade Services contributing about two fifth (40%) of the GDP 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 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 Share of Services still lower than in other South Asian countries Services will witness higher rate of growth in future too Services will witness higher rate of growth in future too Growth of services higher than growth of agriculture and industry Growth of services higher than growth of agriculture and industry

Importance of services in Nepal’s………, contd. Country/RegionAgricultureIndustryManufacturingServices Bangladesh 30 (2.1) 22 (3.1) 21 (6.0) 26 (7.1) 13 (5.2) 16 (6.8) 48 (3.8) 52 (4.7) India 31 (3.1) 22 (2.7) 28 (6.9) 27 (6.0) 17 (7.4) 16 (6.5) 41 (6.9) 51 (7.9) Nepal 52 (4.0) 41 (2.8) 16 (8.8) 22 (6.0) 6 (9.3) 8 (6.7) 32 (3.9) 38 (5.5) Pakistan 26 (4.0) 23 (3.7) 25 (7.7) 23 (3.9) 17 (8.1) 16 (4.2) 49 (6.8) 53 (4.3) Sri Lanka 26 (2.2) 19 (1.5) 26 (4.6) 26 (5.8) 15 (6.3) 16 (6.6) 48 (4.7) 55 (5.3) China 27 (5.9) 15 (3.5) 42 (11.1) 52 (12.3) 33 (10.8) 39 (11.7) 31 (13.5) 33 (8.8) Low income countries 32 (2.8) 24 (3.0) 26 (4.6) 27 (5.0) 15 (6.1) 14 (5.6) 41 (5.1) 49 (5.9) Middle income countries 15 (3.6) 10 (2.2) 39 (2.6) 36 (4.2) 24 (4.0) 22 (6.1) 46 (3.1) 54 (3.5) High income countries 3 (1.8) 2 (1.2) 33 (3.0) 27 (1.9) 22 (--) 18 (2.5) 65 (3.4) 71 (3.1) World 5 (2.7) 4 (1.9) 34 (3.0) 28 (2.3) 22 (--) 18 (3.2) 61 (3.4) 68 (3.2)

Services exports above 10% of GDP (national bop statistics) 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 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 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 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 Travel related services dominating (about 66%) in Nepal’s commercial service export Remittance very important source of foreign exchange earnings 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 Poverty reduction percentage of people below poverty line) from 42 to 31 % in 1993 – 2003 decade attributed to remittances Importance of services in Nepal’s………, contd.

Country/Region Commercial Service Exports ($ million) Population Population(million) Commercial service export (Per capita) Bangladesh India Nepal Pakistan Sri Lanka China Low Income countries Middle Income countries High Income countries World Importance of services in Nepal’s………, contd.

Country/Re gion TransportTravel Insurance & financial services Computer, information, communica tions, and other commercial services Bangladesh India Nepal Pakistan Sri Lanka China Low income countries Middle income countries High income countries World Importance of services in Nepal’s………, contd.

General commitments General commitments No limit in cross border supplyNo limit in cross border supply Limit of us $ 2000 per annum for Nepalis going abroadLimit of us $ 2000 per annum for Nepalis going abroad Condition for existing foreign supplier not to be more restrictive than they exist at the time of Nepal’s accession to WTOCondition for existing foreign supplier not to be more restrictive 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 transfereesmovement 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 Nepal’s commitments in Services

General commitments General commitments No limitation on national treatment for commercial presence exceptNo limitation on national treatment for commercial presence except Prior approval from Department of Industry for Foreign investment 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 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 daysDecision on foreign investment to be provided within 30 days Repatriation of profits and devidends, royalties, loans and interest, proceeds from sales of equity allowed,Repatriation of profits and devidends, royalties, loans and interest, proceeds from sales of equity allowed, 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)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) Nepal’s commitments in Services

Specific committments Specific committments Up to 67% in architectural services; engineering services; integrated engineering services; urban planning and landscaping; advertising services; and financial servicesUp 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 restaurantsUp 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)Minimum investment prescribed($1million in cinema projection) Nepal’s commitments in Services

Ongoing WTO negotiations and issues of Nepal’s interest Nepal not required to make additional commitment 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. 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. Additional and commercially meaningful commitments in initial and revised offers, particularly under mode 4. De-linked mode 4 offers from Mode 3. De-linked mode 4 offers from Mode 3. Elimination of pre-employment conditions, ENTs / LMTs. Elimination of pre-employment conditions, ENTs / LMTs.

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

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

The Way Forward Establishment of appropriate institutions to finance education and human resource development 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 Establishment of an institutional mechanism that assists in the overseas job search, in visa preparation, and in travel arrangements Increase participation of professional organizations 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 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

Thank You Very Much.