By: Rajan Sharma:

President : Nepal Freight Forwarders Association.

¨ Logistics Industry in Nepal.

¨ Industries Opportunities and Strengths.

¨ Key challenges in the development of the Industry in Nepal and the region.

¨ Action taken under Public/Private initiative to overcome the challenges.

¨ Suggestions/Recommendation

¨ Conclusions

Item Value Nepal India Bangladesh Pakistan Bhutan OECD average

Global ranking Number 171 127 119 85 172 -

Exports Cost of exports US$ per

TEU 1,975 1,112

0 1,025 660 2,2250 1,028

Time Days 41 16 25 21 38 10 Documentation Number 11 9 6 8 9 4

Imports Cost of imports US$ per

TEU 2,095 1,120 1,430 660 2,230 1,080

Time Days 38 16 34 21 38 10 Documentation Number 11 9 8 8 12 5

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Stage Exports Imports

Procedures Time (Days)

Cost $/TUS)

Cost (%) Time (Days)

Cost (US$/TEU)

Cost (%)

Documents preparation

14 300 15 14 270 13

Customs clearance and technical control

4 300 15 5 300 14

Ports and terminal handling

4 275 14 6 275 13

Inland transportation 19 1,100 56 13 1,250 60

Total 41 1,975 100 38 2,095 100

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Country Nepal India Bangladesh(a) Pakistan South Asia Regional Average

Ranking 151 46 79 71 -

Score 2.04 3.08 2.74 2.83 2.49

Efficiency of clearance process

2.20 2.77 2.33 2.85 2.22

Quality of trade and transport related infrastructure

1.87 2.87 2.49 2.69 2.13

Ease of arranging competitively priced shipments

1.86 2.98 2.99 2.86 2.61

Competency and quality of logistics services

2.12 3.14 2.44 3.58 2.33

Ability to track and trace assignments

1.95 3.09 2.64 3.14 2.53

Timeliness of shipment reaching destination

2.21 3.58 3.46 3.14 3.04

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Importers Exported value in 2009

Exported value in 2010

Exported value in 2011

Percentage of all exports

World 885,999 834,017 907,634 N/A

India 562,810 546,018 614,379 68%

United States of America

63,085 52,945 70,282 8%

Germany 35,972 32,718 40,902 5%

Bangladesh 60,840 46,165 26,037 3%

United Kingdom 18,466 16,806 19,816 2%

France 14,957 15,822 15,632 2%

Canada 10,273 10,510 11,627 1%

Italy 10,999 9,800 10,629 1%

China 23,868 13,803 10,214 1%

Japan 7,396 7,583 9,180 1% 6

Exporters Imported value in 2009

Imported value in 2010

Imported value in 2011

Percentage of all imports

World 3,754,389 5,127,544 5,915,923 N/A

India 2,131,931 2,920,908 3,751,681 63%

China 421,385 536,369 689,895 12%

United Arab Emirates

44,524 456,777 328,778 6%

Indonesia 107,051 110,696 115,199 2%

Thailand 85,717 102,639 101,132 2%

Argentina 83,655 68,884 99,224 2%

Republic of Korea

38,162 80,491 82,132 1%

Malaysia 63,131 57,541 71,486 1%

United States of America

49,181 73,720 61,583 1%

Saudi Arabia 112,134 25,068 52,336 1% 7

Bilateral Treaties and Agreements ¨ India /Nepal Trade and Transit treaties¨ The railway Agreement India/Nepal,¨ Road service agreement with Bangladesh (yet to signed)¨ Trade and Payment Agreement in 1982 with China.¨ Nepal China Agreement on Road and Other Related Matters, 2002; ¨ Nepal Bangladesh Transit Treaty, 1976;

Regional Agreements : ¨ SAARC , The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic

Cooperation (BIMSTEC) ,South Asia Preferential Trading Arrangement (SAPTA) ,SAFTA,SATIS

¨ Multilateral Agreement ; Nepal became the 147th member of the World Trade Organization (WTO), Acts: Warehouse act under preparation, MTO Act: Needs amendment.

¨ Insurance Act: needs Amendment, Industrial Enterprises Act and Foreign Investment and Technology Transfer Act (FITTA)-underway,Railway Act§ Customs Laws and regulations , Private Financing Act 2006-BOT, Land

Acquisition Act-1977, Environment Protection Act/Rules-1997, Export and Import Act-1957, Motor Vehicle Act-1993,Labor Act-1992

Institutions: NTTFC, Nepal Inter-modal Transport Development Board (NITDB) ¨ Road Board Nepal ,Industrial Promotion Board (IPB),Civil Aviation Authority of

Nepal ,Department of Transport Management.

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Procedure to Export

Days

% of Total

Cost US$

% of Total

Document Preparation 14 34.15 300 15.19

Customs Clearance and Technical Control 4 9.76 300 15.19

Port and terminal handling 4 9.76 275 13.92

Inland transportation and handling 19 46.34 1100 55.70

Total 41 100.00 1975 100.00

Procedure to

Import

Da

ys

% of

Total

Cost

US$

% of

Total

Document

Preparation 14 36.84 270 12.89

Customs

Clearance and

Technical

Control 5 13.16 300 14.32Port and terminal

handling 6 15.79 275 13.13

Inland

transportation

and handling 13 34.21 1250 59.67

Total 38 100.00 2095 100.00

41 Days to Export: Transit Kolkata Port 38 Days to Import: Transit Kolkata Port

TAB Rank 2012: 170TAB Rank 2013: 171

Region BT GR ER Total

Eastern Central Western Mid-Western Far-Western

948.192218.83 1216.16 490.37 399.49

1133.85 1851.88 394.03 815.97 417.52

1480.17 2634.92 1517.85 1098.56 662.78

3562.21 6705.63 3128.04 2404.9 1479.79

Total Note: BT=Bituminous, GR=Graveled,

5273.04

ER= Earthen. Source: DOR,

4613.25

Government of Nepal.

7394.28 17280.57

Transport vehicles used for road movement of cargo are very traditional. The Trailers and flat cars to carry containerized traffic are very few and not readily available at the gateway port for International or bilateral cargo.

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¨ Jayangar in India to Janakpur 42 km rail line which basically carries the passenger traffic.

¨ The Raxoul of India and Birgunj ICD in Nepal, a stretch of 5.4 km for goods traffic. This being the broad gauge line has made it possible to link with all major cities in India including ports. The distance between Birgunj and Kolkata port is about 704 km and between Birgunj and Haldia port is about 832 Km.

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¨ Air service plays an important role in international trade particularly for Nepal. The high value and perishable commodities are traded through air routes. Domestic air transport has a significant place in the transportation of goods to and from the hinterland and remote areas. Currently, there are altogether 53 airports in Nepal, of which only 32 are in operation. Altogether 10 air fields including one international airport have got the bituminous paved runways. A second international airport has been planned to be constructed in Nijgadh. There are 37 STOL (short take-off and landing) airports that handle small aircrafts.

¨ Civil Aviation Authority of Nepal has issued Airline Operation Certificates to 47 airline companies. But only 20 airlines are operating their air service. Of them, 5 airlines are related to recreation and aviation sports and 5 companies are providing helicopter service in the supply of food, clothes, medicine and construction materials to hilly and Himalayan regions.

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¨ The TIA customs has a modern cargo complex of adequate area. But it is not well managed. There is frequent shortage of power supply in TIA cargo complex. The power shortage is affecting continuous working environment and operation of X-ray scanning and weighing equipment.

¨ Birgunj ICD has all facilities of handling all types of trafficsincluding containers, bulk and break cargo.

¨ Birgunj customs has three warehouses; one for exports and two for imports. Of these three warehouses, one belongs to National Trading Limited, a state owned trading company and two belong to NTWCL.

¨ The Biratnagar ,Bhairahwa warehouse is handled by the terminal operator.

¨ The Kakarvitta is handled by NTWCL.

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Offices North South Total

Main Customs 9 20 + Airport+ PCA =22 31

Sub Customs 6 136+ Post office = 137 143

Total Customs 15 159 174

Total Staff 1273

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Reform Initiatives§ Preparation for the Accession to the Revised Kyoto Convention.

§ Optical Fiber Connectivity – 11 Major Customs (2012)

§ Installation of IP Camera (2011/12) – 4 Major Customs§ Webbased Customs Valuation system for third country import

Cargo,§ Development of Customs Reporting software.§ Establishment of separate Customs Reform and Modernization

Section§ Conducted Organization& Management study.§ Study commenced for the development of e-Customs Master Plan,

Infrastructure Development Master Plan, HR Development Master Plan, and Integrated Laboratories.

§ Development of 5 Modules to support ASYCUDA clearance namely, Agent's Module, Risk Management System, Valuation Database software, Data Warehouse and Passenger Clearance System.

§ Tatopani, Tribhuvan Airport, Nepalgunj, Bhairahawa, Kakarvitta, Biratnagar and Birgunj are the major customs. Birgunj customs alone accounts for 70 percent of total trade.

¨ Dry Ports Accomplished: Birgunj, Bhairawaha ,Kakarvitta, Biratnagar

¨ Dry Ports under design and feasibility study.

a. Rasuagahdi ( ICD)

b. Dodhara Chadani (ICD)

c. Kathmandu (CFS)

* Larsa (China Boarder under construction)

* ICP’s= 4 under construction; Birgunj, Biratnagar ,Nepalgunj, Bhairahawa

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¨ Kolkata/Haldia ( India),Kakarvitta,Birgunj,Biratnagar,

Bhairahawa and Nepalgunj

¨ Benapole/Petropole( B’desh/India) **

¨ Radhikapur/Birol (India,B’desh)

¨ Fulbari/Banglaband (India/B’desh)

¨ Rohanpur/Singabadh (B’desh/India)

¨ Kalarvitta Via Panitanki to Phunchulung (Nepal/Bhutan)

¨ Tatopani/Khasa (Nepal/China)

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¨ Total members:120 and 5 associate members.¨ Executive Board: 15¨ Representation in Government:¨ 1.NTTFC¨ 2.NITDB¨ 3.Custom Trade Facilitation committee¨ 4.FNCCI¨ 5.Chambers* STD and CoD of NEFFA with international

Liability/standard.* Membership criteria: at least one years of non dispute

in trade.* International Membership ? ?* Sustaining with membership fee.

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¨ The majority of the companies in the industry are small or medium, with fewer than 7 to 35 employees. The implication is that they might lack the operations scale and resources to offer an advanced value-added logistics services. This point to the possibility of merger and alliances as a means of achieving scale economies and improving services in the industry.

¨ There is need of capacity enhancement from foundation service providers to 3PLs,LLP’s to SCIs, LLMs.

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¨ Companies in the industry are highly capable of providing traditional logistics services such as freight forwarding, direct transportation service, warehousing, customs clearance; but they seem to be lack of the capability to provide other value-added logistics services such as purchasing service which is expected of an advanced 3PL service provider. Perhaps this is because many of them are small and lack of the financial strength to invest in the physical assets and capital-intensive information technologies needed to provide such service.

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• 37 Steps• Nine

Documents required at Kolkata Customs by Rail or Road.

Procedures and Documents at Kolkata Port

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¨ In order to work out a smooth and speedy transit cargo movements followings needs to be done: In case of transit traffics through India: ­ (a) it is necessary to implement transshipment modality from

Kolkata to Birgunj ICD and same for trade via Bangladesh.­ (b) most modern and acceptable modality should be developed

for simplification and harmonization of customs and transit procedures, ­ (c) automation in the gateway port and border customs point in

Nepal should be established for the exchange of transit documents and other related information, and ­ (d) corridor monitoring system (CMS) should be introduced for

railway as well as truck movements in order to reduce risks of pilferages and thefts and also reduce dual time and turnaround time. ­ (e) competition with courier companies.

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¡ In view of the incompatibility of railway tracks and wagons between India and Bangladesh, commercial viability of using railway transport for Nepali cargoes movement in an immediate future is minimal.

¡ In the long term, uses of railway mode of transport might be viable only when Bangladesh can modify its railway services compatible with the Indian systems and infrastructure and CFS to receive and handle Nepali cargoes at the border crossing point/s.

¡ Considering the nature and volume of existing Nepali cargoes, among the six border-crossing points ,the only viable point or route in an immediate future is the Banglabandha-Phulbari.

¡ Full utilization of this route also required addressing the importing issues such as: (a) truck conveying and escorting system be uplifted oreliminated, (b) single document system along with the provision of car pass for border crossing transit traffics, (c) a substantial improvement in the infrastructural facilities in Banglabandha, (d) construction of CFS at Panchagadh for rail-bound cargoes, (e) automatic transfer of cargoes from Banglabandha and vice versa, and (f) early conclusion of road transport agreement between Nepal and Bangladesh.

¡ Up gradement of Mongala port.

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¡ Kakarvita to Phulbari 54 km, Phulbari to Banglaband close, Banglaband to Panchgadh 53 km.

¡ Excellent facilities in Phulbari, but limited facility in Banglaband,

¡ Customs documents processing at Panchagadh¡ Car pass system in place but no immigration,¡ Panchagadh station has potential but infrastructure needs to

be developed in Panchgadh.¡ The Phulbari Banglaband corridor seems mort shortest and

viable corridor at present. There is a need to improve the facilities in the corridor.

¡ Railway link of 40 to 45 Kms till the nearest Broad gaze station in Bangladesh.

¡ No mechanism to address day to problem as International calls need to be made ,no mechanism of regular meetings and visa provision for staffs of customs are complicated

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q Difficult terrene poor transport infrastructure,¨ Lack of Freighter operation.¨ India blocked.¨ Goods carrier Act¨ Cargo Act¨ MTO act Amendment¨ Insurance Act¨ Non Compliance with the appropriate INCO TERMS.¨ Problem of delays and uncertainty in trade routs¨ National Network¨ loss, damage and deterioration en route, safety and security¨ Maintenance of infrastructure and monitoring the safety and security concerns.¨ Too small a market for international interest¨ Foreign Investment in Transport Logistics.¨ Too much of Involvement of CHA in Bangladesh and India¨ High Detention and Demurrage charges¨ Heavy delivery charges of liners¨ Lack of consolidation of LCL shipment at Kolkata.q Lack of involvement of Association related to logistic service by the government in the

policy making mechanism.

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¨ Majority of NTBs in South Asia are related with SPS and TBT measures.

¨ Harmonization of standard with support of each country to achieve the standard is necessary.

¨ Human resource and skill for accreditation is necessary

¨ SARSO (South Asia regional Standardization organization )should take the lead for regional agreement for mutual reorganization of the test and certificates.

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¨ It is a virgin market.¨ Warehousing and distribution services ¨ ICD management¨ Railway is just on the womb¨ Airport and management ¨ Technology introduction¨ Hub for cargo to Bhutan and other destinations.¨ Lots of study going on for consultancy¨ Many NEFFA members don't have agency agreement abroad .¨ Air Transport for Freighter operation¨ Investment in Logistic hardware as well as software¨ Strategic location as Nepal is between India and China.¨ Opportunity at the sea ports with new agreements at India and

Bangladesh.

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o Policy improvement, improve infrastructure by all modes of transport, international trade measures (to give preferential treatment to landlocked countries goods. Technical and financial international assistance and know how on policy improvement and infrastructure, monitoring and following up on agreements).

o The need to ratification of 10 key international instruments to facilitate transport and trade in the region like:Convention of Road Traffic, Convention of Road signs and signals, Customs convention on the international transport of goods under cover of TIR Carnet, Temporary imports of vehicles of customs, Frontier control of goods, Int’l carriage of goods by road, Int’l convention to facilitate the crossing of Frontiers for Passengers and baggage carried by rail etc.,

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¨ Full and inclusive representation of the private sector in trade facilitation initiatives in essential. The Right Business Support Organization representation.

¨ Implementation of basic trade facilitation measures should be consistently enforced and re-enforced nation-wide.

¨ Paperless trade, including development of national and regional single windows and development of trade portal.

¨ Physical inspections should be minimized whenever possible, in particular through adoption of risk management techniques by all organizations involved in the trade process.

¨ National trade facilitation performance monitoring mechanism needed to identify the real and most important barriers to trade efficiency.

¨ Healthy competition among transport, logistics and other trade-related service providers should be encouraged.

¨ Reviewing payment systems and their efficiency may reveal new opportunities for improving trade facilitation performance.

¨ Industry-specific trade facilitation program should be considered, in particular for agricultural product.

¨ Harmonization of documentary requirements across countries should be actively pursued.

¨ Bilateral and regional free trade agreements should systematically address trade facilitation issues.

¨ Logistic Performance and Doing Business methodology to be changed for LLDC like Nepal.

¨ Government has to put forward time and cost reducing procedure like the Subject to Safe landing and International Transhipment of Goods with India for the port of Kolkata and ports that will be agreed upon in future like Mongla, Chittagong in Bangladesh and Visakhapatnam or another ports in India. 29

¨ Transparency: prompt publications and notification of relevant laws, rules and procedure, etc.

¨ Efficiency: efficiency in administration and discharge of duties.¨ Mutual assistance: Assistance and co-operation between trade facilitating

institutions.¨ Support to be provided for upgrading their capacity and infrastructure.¨ Appeal mechanism: Mechanism for the appeal against administrative

rulings.¨ Designation of fixed transit transport routes and provision of necessary

facilities ¨ Harmonization of rules, regulations and procedures for goods and

vehicles, including customs procedure and traffic signal/rules, etc.¨ Mutual recognition of certificates of vehicles’ roadworthiness, driving

licenses, insurance policies, etc.¨ Adoption of the TIR system or a similar regionally based equivalent

customs transit system. ¨ Effective risk management system.¨ Effective dispute settlement system.¨ Creation of national institutions for coordinating the implementation of

agreement.¨ Special provisions for the transportation of time- sensitive goods such as

drugs and perishable goods.

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¨ Logistic master plan

¨ Trade facilitation Projects with WB.

¨ Railway

¨ SW, Trade Portal

¨ Commercial labs

¨ Documents and procedure simplification

¨ NTTFC formation

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¨ Change in the mind set; transit not as one way concessions given to by India or Bangladesh but an arrangement of achieving the goal of regional integration through instilling the seamless transport system.

Therefore, it is necessary to free Transit from Political and bilateral issues.

¨ Develop and implement the key regional transport projects for facilitating the cross border movement of goods and passengers.

¨ Conclude a regional transport agreement in the fashion of ASEAN CBTA-.

¨ Diversify the transit corridor and create competition among various mode of transportation.

¨ Encourage the use of through bill of lading or multimodal transport documents in transportation of trade by a appropriate ‘International Transshipments’ modality acceptable to all

¨ Create a regional fund for financing the development and improvement of transport infrastructures in the region. Also upgrade and maintain the existing infrastructures and facilities.

¨ Enhance cooperation between G2G, G2B and B2B.

¨ Scope of Courier and Cargo to be distinguished.

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¨ A lot of room for improvements in trade facilitation for Nepal and the region

¨ The South Asian Region is home to worst and best TF performers: much can be gained from regional exchange of knowledge and experiences as well as support from International donor agencies. But this needs to be done in a Private sector basis not only with the Government.

¨ Strong political will as key to making progress on TF issues is needed from the Nepal Government side as well as the Transit providing country .

¨ The introduction of Develop Infrastructure related to trade facilitation i.e : ICDs/ICPs establishment and proper management and monitoring and evaluation.

¨ Reduction in transit cost/ transit time and Reduction in procedure and number of documents through automation E-customs, e-Import, e-export, e-Manifest, e-payment and e-warehousing RFID and National Single Window system through Cross Boarder Management system.

¨ Help Strengthen the BSO’s related to transport logistics with capacity enhancement and technology.

Conclusions

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¨ Transport transit cooperation is an important agenda in deepening regional integration and connectivity in South Asia.

¨ There has been a lack of proper business model in the nation’s infrastructure development. As a result, the nation’s competitiveness has not been appropriately enhanced.

¨ Logistics related laws and regulation has NOT been significantly appropriately amended to help facilitate imports and exports. Like the Goods carrier act and amendment in the MTO act, Cargo act Formation , Warehouse Act, insurance Act etc.,

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¨ Regional economic integration in South Asia through cross-boarder free movement of vehicles might become a reality soon as SAARC nations are moving closer to striking a deal.....

¨ ....despite declaring 2010 to 2020 as the “Decade of Intra-regional connectivity in SAARC", the region is the least integrated among all the regional blocs in the world...

¨ Increase trade in South Asia- due to more connectivity will save USD:2 Billion per year by improving consumer welfare as per study of CUTS..

The Himalayan Times of 30th May 2013.

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