Non-Agricultural Trade and Poverty Reduction: Nepalese Experience Pushkar Bajracharya

Introduction Types Domestic International Entrepot Auxiliary to trade Infrastructure Services

Why trade occurs Absolute advantage Comparative advantage Resource endowment

Importance Generates benefit to all those who participate in trade Promotes economic activities Generates employment opportunities Contributes to growth Reduces poverty e.g. Japan, Korea, Taiwan, Singapore, Hong Kong, China, SE Asia

Major exports of Nepal in 2004/05 Rs 10 m. Overseas Garment Rs 587 Carpet Rs 612 Pashmina Rs 104 Handicrafts Rs 101

Major exports of Nepal in 2004/05 India Jute goods Rs 270 Chou chou 37 Toothpaste 128 Polyster yarn 190 Veg. ghee 464 Thread 164 Plastic goods 136 Corrugated sheet 307 Textile 300 Juice and chemicals 250

Evidences in Poverty Reduction Research show 83% of poverty reduced by growth Trade a major contributor to growth

Role in Poverty Reduction Have generated employment opportunities to almost 500,000 people ( direct and indirect ) in export oriented industries alone Informal sector is estimated to generate some 2 million employment now ( 1.6 million in !998/99 ) of which trading is the main activity

Role in Poverty Reduction Trade promotes auxiliary activities e.g. transportation, communication, tourism, support services, Trade also encourages production activities Overall impact is on poverty reduction

Evidences in Poverty Reduction in Nepal Poverty reduction by 3% points in between mainly contributed by trade Poverty reduction strategies mainly encompassing micro and small enterprises as by PAF, MEDEP that relate to trading or manufacturing for trading

Evidences in Poverty Reduction products and services CARPET Generated more than 300,000 employment through spinning, carding, weaving, finishing, washing, and trading More than 150,000 households benefitted Even now some 60,000 people getting jobs Backward linkage would have substantially contributed to generate more jobs

Evidences in Poverty Reduction products and services Garment Generated up to 80,000 jobs at its peak with local employment for 60% Current employment for 5000 only Non-export opportunities still significant

Evidences in Poverty Reduction products and services Pashmina Generated up to 100,000 employment Significant reduction now

Evidences in Poverty Reduction products and services Micro enterprises Generated 1 employment with an investment of Rs 10,000 In small with rs 250,000 and large 1 to 2 million

Cautions Trade in isolation not possible Trade cannot substitute production International market highly volatile Domestic cushion essential Must have a mechanism of standardisation and monitoring Tariff and non-tariff barriers major issues Advantages to LDCs limited Cost, quality, margins, delivery, imposition of conditions deterrents

Strategies Promote linkages Tap outsourcing Develop institutions like export houses to promote micro and small activities Enhance monitoring Fight for LDCs Fight for making global trading system more equitable Make environment conducive

Conclusion Balanced reporting and presentation needed Overall impact assessment and consideration needed Trade really an important cog in development particularly for a country like Nepal with small market.

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