Good Afternoon & Namaste !

UNESCAP

Regional Conference on Strengthening Transport Connectivity and Trade Facilitation in South and South-West Asia

9-10 December, 2013 Lahore, Pakistan

Country Paper, Nepal

Cross- Border and Transit Transport by Land

BackgroundNepal is surrounded by India in south, east and west and Tibet, the Autonomous region of People's Republic of China in the North and lacks the access of seaport.The absence of seaport deprives the competitive global business.The sea freight is almost same to all countries. However, the extra transit cost, sometimes, is exorbitantly high up to 40% in Nepal’s case that inflates the price of both imports and export.But, It has Opportunity to be-

Land Linked Country between India and China –Transport Hydro power provider to the region- Trade A regional hub for tourists- Again Transportation facility

BackgroundFundamental Transit Police Issues of Land Locked Countries in South Asia

South Asia’s three LLDCs—Afghanistan, Bhutan and Nepal—are also least-developed countries (LDCs). Afghanistan depends on the ports Pakistan and Iran for its overseas freight traffic. Both Nepal and Bhutan solely use Indian ports for their overseas trade: Nepal uses Kolkata port and Haldiya port and Bhutan uses Kolkata port.SSWA is probably the region having poorest intra- regional transport connectivity in the globe.

Nepal's Trade Balance with Some South and South- West Asian Countries in 2011/12

Country Export Import Trade Balance

Afghanistan 97,883.9 299.5 97,584.4Bangladesh 2,578,079.8 1,502,817.4 1,075,262.4Bhutan 543,836.2 249,411.5 294,424.6India 50,933,222.

3321,346,418.6

-270,413,196.3

Pakistan 225,906.6 266,286.4 -40,379.8Turkey 548,770.3 420,301.3 128,469.0

(Rs. in thousand)

* EstimatedSources: Nepal Rastra bank

Existing Legal basis for Cross- Border and Transit Transport by Road

• Multilateral and Bilateral Trading Arrangements• Bilateral Trade Agreement with 17 trading partners

Nepal – India Transit Treaty, 2006 Trade and Transit Treaty between Nepal and China- Nepal Bangladesh Transit Treaty, 1976 Transit right of LDC related UN conventions 1980, 1991 and

2001, Trade and Transit right as managed in Law of Sea 1958, 1982 WTO, BIMSTEC,SAFTA (Nepal's bilateral Trade Agreement

between 17 countries and Nepal's accession to the WTO, April, 2004)

BIPPA agreement concluded with 10 countries including India Double Taxation Avoidance Agreement (TAA) with India

• SAARC Agreement on Mutual Administrative Assistance in Customs Matters

• GSP schemes for export to Belarus, Canada, EU, Japan, New Zealand, Norway, Russian Federation, Switzerland, Turkey, and the United States

Main Corridors for Cross-Border Transport by Road

Existing Legal Basis for Cross- Border and Transit Transport by Road

• Agreed Routes for Mutual Trade• India-Nepal: 27 Bilateral trading points (Treaty of Trade)• China-Nepal: 3 international and 3 bilateral trade point

• Transit Route India and Bangladesh• Kolkota/Haldia Sea Port for 3rd country trade connecting with 15 Nepal-India Routes• Phulbari-Banglabandh Transit to Bangladesh

Cross-Border Trading Points

Bhutan

Bangladesh

China

India

NEPAL

Mahendra highway- 1027 km from Kakarbhitta border to Mahendranagar border (AH2)Missing link at the west Mahendranagar (Nepal)- Banabasa (India),Poor conditioned road in East side Phoolbari

Roads along South to North sides-Raxaul(India)- Birgunj (Nepal)- Hetaunda- Narayanghat- Kathmandu- Tatopani (China Border) AH42Kathmandu- Galchhi- Rasuwagadhi- Kerung (Track Opened)

27 Trade & Transport Links along the border of Nepal and India3 trade & Transport Links along the border of Nepal and China

Major Challenges in Cross Border and Transit Transport by Road

• Nepalese trade is mostly inclined with India and China;• Dependence on transit providing country's; infrastructure, political relations, peace and stability, administrative practices;• Restricted choice of ports and routes ; • Cumbersome transit processes including procedural controls; • Hassles in the from of multiple checking agencies ; • Actual documentary requirements higher than those specified in transit treaty ; • High insurance cost due to lack of competition ; • Transshipment;• Because the import and export trade is imbalanced, there is significant empty back-haul that creates inefficiency

Major Challenges in Cross Border and Transit Transport by Road

• The Banglabandha port was formally inaugurated in May 2004 but has not been fully functional owing to the absence of a transit agreement for the use of Indian territory as a transport route for Bangladeshi, Nepalese and Bhutanese trade cargoes. • Nepali transport trucks are not allowed entry into Bangladesh and must exchange their cargo at the "zero point" of the Indo-Bangladesh border. • Strikes • High cost • Need to cross different checking and time consuming

Current Status of Cross-Border Operations for Freight and Passengers by Rail

Railway transit route from Nepal to Kolkata SAARC Rail Routes (Bangladesh)

• Jayangar in India to Janakpur 42 km old narrow gauge rail line which basically carries the passenger traffic.

• The Raxaul of India and Birgunj ICD in Nepal, a stretch of 5.4 km for goods traffic.

Current Status of Cross-Border Operations for Freight and Passengers by Rail

Half the third-country imports transit in containers by rail from Kolkata to Birgunj. The low tonne/TEU ratio suggests these goods are high-value goods. The remaining 50% of third-county goods travel to Nepal by road in containers or as break-bulk. Approximately 5% of third-county containers arriving by rail at Raxaul originate from Chittagong. While there is a rail link from Chittagong to Dhaka ICD, it is not possible to transit completely by rail to Nepal (West, though Bangladesh and India) as the Jamuna Bridge (near Saidabad, Bangladesh) cannot support rail freight loading.

Current Status of Cross-Border Operations for Freight and Passengers by Rail

The defined corridor for bilateral rail movement is between Nepal and India is- Single broad gauge line from Birgunj to Muzaffarpur (137km); Double track between that point and Varanasi (103km); and thereafter; Electrified double line to Kolkata or other Indian destination

The distance from Kolkata to Birgunj is 704 km and between Haldia and Birgunj, 832km. The train path is controlled by Indian Railways and the container haulage operation is Concor. 20, 000 TEU per annum arrive in Nepal and represents about 250 train movements to Nepal each year. Indian Railways is required by agreement to unload the 80-90 containers on the rake in 8 to 12 hours and this is achieved using modern reach stackers (there are no rail mounted gantry cranes)

Legal Arrangements for Cross Border Rail Operations

Nepal India Railway Service agreement in May 2004Need to review in every 5 yearThe existing railway agreement signed in 2004 allows limited movement of rail Cargo between Birgunj ICD and Kolkata and Haldiya ports of India.

Major Challenges in Cross-border rail Transport

• There are a number of time hindrances to the rail transit of goods that include: • the need for aggregation of goods at the port of departure or the de-stuffing and aggregation of containers at the port of arrival;• the need to fill each train rake before it can depart; and • the need to agree train paths between existing train services. • as the shipping lines only conventionally provide 14 days free time for the use of containers from ship discharge to return to port, the extended transit times can result in significant demurrage charges that add significantly to overall cost. • the consequence of these hindrances is that for cost reasons, or because cargo is time-critical cargo, goods are transferred from the port by road.

• Lack of timely amendment of Rail treaty with India• Need to extend railway link in Kakrabitta, Biratnagar, Nepalganj and Bhairawa Customs • Infrastructure development for railway connectivity

Transport Facilitation Measures

Transport Facilitation MeasuresThe ability of existing transport and logistics infrastructure within Nepal and the key transit corridors to efficiently and effectively handle the varied types and volumes of products also needs to be taken into account. This extends-

across the strategic and local road network within Nepal, in-country warehousing and parking needs, airports, and border post facilities. External infrastructure includes road and rail transit corridors, together with their integration with gateway port systems in India and Bangladesh. Onward shipping or air freight services providing the extended connectivity from the gateway ports and airport to international transit hubs.

Transport Facilitation MeasuresFacilities at the Border At the border there are two distinct border facilities, these being 27 traditional border post located on the historic crossing points between India and Nepal, and five Inland Clearance Depots (ICDs) at:

Birgunj (rail only facility, India); Biratnagar (road, India); Bhairahawa (road, India); Kakadbhitta (road, India); and Tatopani (road, China).

• Feasibility study has been done for the construction of dry port in Sharalahi, Rajbiraj, Gaur and Maheshpur Customs .• Integrated check post construction in Birantagar, Birgunj, Nepalgunj and Bhairawa customs under process.

Transport Facilitation Measures

Proposed ICD

Transport Facilitation MeasuresWarehousing The TIA customs has a modern cargo complex of adequate area. But laging well managed. Birgunj ICD has all facilities of handling all types of traffics including 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.

Transport Facilitation MeasuresCustom Offices

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

Acts, Policies and Major Initiatives Taken

• Custom Acts and Regulations amended and new provisions are incorporated in line with Revised Kyoto Convention and WTO Valuation system• Trade Policy 2009 and Industrial Policy 2010• EIF Steering Committee under the chairmanship of Chief Secretary which is apex body for all trade and trade facilitation related issues • Trade and Transport Facilitation Committee under Commerce Secretary to steer trade facilitation• Trade Facilitation committee formed in Department of Customs under chairmanship of DG. • Customs opening days and hours harmonized with the bordering countries’ India and China’s opening days and hours• Tariff rates streamlined as per WTO commitments• 100 percent performance based incentives to the customs employees • Emphasis on good moral conduct and transparency on operation

Acts, Policies and Major Initiatives Taken

Trade Facilitation by Customs Reform & Modernization Strategy CRM Action Plan 2003-2006 (Completed)CRM Action Plan 2006-2009 (Completed)CRM Action Plan 2009-2013 (Completed)CRM Action Plan 2013-2017 ( Proposed/ Ongoing )

Key Challenges of Trade Facilitation in NepalConcluding A framework agreement in south Asia which would include elements such as;

Harmonization of rules, procedures and documentsMutual recognition of certificates, licenses and polices, Effictive dispute settlement and risk management systems, Special rules for certain products , Infrastructure up gradation, particularly in LDCs (Adhikary)

Facilitating transportation of goods in transit for intra – regional as well as extra-regional trade in keeping with the spirit of Article V of the General Agreement on Tarrffs and Trade (GATT) relating to "Freedom of Transit" Supporting the implementation of the SAFTA and deepening regional economic integration

Key Challenges of Trade Facilitation in Nepal

Provision of multimodal transport facilityAdoption of the TIR (Transports International Routers) system or a similar regionally based equivalent customs transit system.Investment in infrastructure hardware as well as softwareQuality of roads and railways infrastructure and surviceGauge compatibility for railwaysBorder facilities including customs, infrastructureUse of ICT in trade administration)Issues on third country passage via India Quality control/quarantine related issueIllegal trade regulation

Key Challenges of Trade Facilitation in NepalWorking modalities

Weakly harmonized working hours between Bilateral trade with India and Bangladesh More steps, Documents requirements and time to clear Kolkata Bound import and export cargo Lack of cooperation and integrated approach among border agenciesExcessive physical intervention at the border pointsOthersDomestic Supply side Constraints (Inadequate infrastructure, transportation, meeting the certification requirement) Barring of Nepalese transporters heading from KolkataLack of Comprehensive Transport Agreement

Key Challenges of Trade Facilitation in Nepal

• 37 Steps• Nine Documents

required at Kolkata Customs by Rail or Road.

Procedures and Documents at Kolkata Port

Way Forward in TF in Future DaysShort term (within one year)CTD automation of Kolkata Bound Transit CargoAccession to Revised Kyoto Convention (with IFC support)Trade Facilitation Framework Master Plan (with WB support)Single Window Master Plan (with WB support)Logistics Master Plan (with WB support)E-Customs Master Plan (with ADB support)

Way Forward in TF in Future DaysMedium term (within three year)Trade Corridors Development(with ADB support)Process and Procedures simplification for E-CustomsImplementation of E-Customs Master Plan Readiness to implement Single WindowOperation of additional four ICPs and one ICDTransshipment through BL for transit cargo

Way Forward in TF in Future DaysLong term (within five year)National Single WindowCross Border Harmonization and ExchangeActivities in PipelineWeb Based System Development for Customs (with Korean support)Strategic Action Plan Development (with IMF and USAID support)

THANK YOU

Let us have Joint Effort from the respective Governments, People and Entrepreneurs of this region as well as the development partners working in this region to build Better SSWA.