Kathmandu. Minister for Industry, Commerce and Supplies Damodar Bhandari has said that the budget was not enough to upgrade the country from least developed country by 2026.
Speaking at a meeting of the Development, Economic Affairs and Good Governance Committee under the National Assembly here today, he said it was difficult to implement the ‘Easy Transformation Strategy’ prepared by the government to upgrade from least developed countries (LDCs) due to lack of budget. He said the strategy could not be implemented in an integrated manner due to lack of inter-agency coordination.
It seems that a budget equivalent to Rs 4 billion will be required to implement the preparation and action plan to be made for upgrading from the highly developed countries. This year our budget is only Rs 40 million. With this amount, it will be difficult for us to get results,” he said. He stressed that all ministries should work in their respective sectors as per the Integrated Trade Strategy prepared with the objective of supporting the upgradation. He stressed the need to increase domestic production and productivity to upgrade the country into a developing country. As long as the contribution of industry and manufacturing sector to the country’s GDP increases, there will be a problem,” bhandari said.
So far, the facilities that the country has been getting as LDC will be reduced after upgrading. The situation before and after upgradation will be different in the areas of international trade, development assistance mobilization, etc. International trade is one of the most affected sectors when upgraded from least developed countries.
According to the Industry Minister, the country’s export trade is expected to decrease by four percent due to reduction in LDC facilities.
According to the provisions of the World Trade Organization (WTO) after the upgrade, Nepali goods and services will not get priority and facilities in the international market as an LDC. Secretary at the Ministry of Industry, Commerce and Supplies, Govinda Bahadur Karki, said that discussions are underway with the European Union, Turkey and other countries for the continuation of ‘Duty Free’, ‘Quota Free’ and other facilities so that such facilities do not lose even after upgradation.
According to the information given to the committee, subsidy will not be allowed on the export of agricultural products after upgrading. Subsidy on export of non-agricultural goods will also be cut. Countries with per capita gross national income (GNI) of less than $1,000 can get subsidies on exports of non-agricultural products. This situation will automatically end as there will be a condition of per capita income when upgraded from the least developed country. However, the facilities being provided by the government in the service sector will remain the same. The subsidy on domestic trade of agricultural commodities within the country will also remain the same. Subsidy will not be allowed on non-agricultural local goods. At the stage of upgrading, the country will have to inform the WTO whether such grants have been provided or not.
According to the Federation of Nepalese Chambers of Commerce and Industry( FNCCI), more than 250,000 workers are employed in readymade garments, carpets and pashmina sectors. It is estimated that 10,500 workers will lose their jobs in the sector alone due to the decrease in exports. The economic growth rate will also be affected due to the decline in the country’s exports.
Upgrading the LDC will also have an impact on the development assistance that the country is receiving from bilateral and multilateral development partners. Development assistance facilities will be cut. Financial institutions, including the Asian Development Bank and the World Bank, the country’s major development partners, will cut the facilities. For example, Nepal has been getting concessional loans from the Asian Development Bank. The loan is mature in 24 to 32 years and Nepal gets a grace period of 8 years on such loans. Currently, Nepal is paying 1 percent to 1.5 percent interest on such loans. After the upgrade, Nepal will get a loan from ADB for a maximum period of 25 years. In which the grace period will be five years and the interest rate on such loan will be at least two percent. Similarly, Nepal will also lose the facilities of the World Bank, which is another major development partner. Being a low-middle-income country, it has stopped getting concessional loans from the International Development Organization (IDA).
As of 2026, Nepal will get a 30-year maturity period and a five-year concessional period of 1.25 per cent interest rate as a blend credit through the World Bank. Such loans will also attract 0.75 percent service charge.
The United Nations Development Programme (UNDP) and the United Nations Children’s Fund (UNICEF) provide a certain percentage of their resources to least developed countries. After upgrading, the country will not get the assistance of those titles. Similarly, financial assistance from the LDC fund will also be withheld. However, the financial facilities under the United Nations Framework Convention on Climate Change (UNFCCC) will remain in place. Participating in international forums as an LDC will also reduce the facilities and educational scholarships.
Intellectual property rights are another area affected. “Facilities under the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) will not be available. Country’s
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Facilities such as patents, designs, copyrights and confidential formulas of foreign companies being used by pharmaceutical companies will be tightened. Technology transfer will also have an impact.
After upgrading, Nepal will also have to abide by the commitment related to liberalization. Although Nepal has formulated a ‘smooth transition strategy’ to address all these problems, its implementation is challenging, according to the Ministry of Industry. rss
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