Efficient logistics and trade facilitation are central to increasing the competitiveness of external trade. Time, cost, reliability and flexibility in moving goods within national boundaries and across international borders are the determinants of measuring the supply chain performance of a country. It is widely accepted that the breakdown of supply chains and missing links in the chain have put developing countries at the low ebb of the ‘logistics performances index’ of the World Bank. Sometimes, landlocked countries are even worse off as they need to depend on the performances of the logistics services of the transit countries where they have no or very little control over the movement of goods in transit.
The performance of trade logistics services of Nepal has been dismal, as it has slipped to the 151st position out of 155 countries in 2012 from 147 in 2011, according to the World Bank logistics performance index. Such a cumulative indicator is based on the efficiency of the clearance process by border control agencies, quality of trade and transport related infrastructure, the ease of arranging competitively priced shipments, competence of logistics service providers and the provision on tracking and tracing of consignments.
Trading across borders requires speed, simplicity and predictability of the formalities by the border control agencies including customs, quarantine, food test laboratories and terminal management company (s), among others. The process of lodging of export/import declaration and their quick processing and clearances by the border control agencies requires a strategic reform plan that includes changes in the existing laws and regulations, human resources development, institutional strengthening, adoption of ICT and modern technology, and last but not the least, persuasion of change management process. The customs reform plan of Nepal, to some extent, follows this principle but is yet to serve as a comprehensive tool of trade facilitation.
Lack of transport connectivity to link production centers with the market, poor maintenance of the existing roads and highways, absence of bridges and lack of container freight stations and parking places for heavy vehicles are bottlenecks in the smooth movement of goods around the country. Major cities in the country, including the capital city of Kathmandu where goods for export and internal consumption are produced on a large scale, lack this kind of physical infrastructure. The movement of cargo trucks to and from Kathmandu is a nightmare for the drivers who have to get into regular scuffles with traffic management authorities for getting access to the delivery point of goods in the city.
To add, clearances of export shipments by exporters is a tedious process, requiring visiting a number of entities located at different places around the city. They are not interconnected by any ICT system and thus, necessitates visit by the exporters and their agents, particularly for certifications of clearances by the product associations, SPS authorities, banks, insurances, archaeological departments (for handicraft items) and the certificate of origin by the chambers. Thus, the cost of processing gets unnecessarily inflated and can be corrected by introducing a single window system and appropriate ICT based system. Any effort in this direction seems slow and lacking.
Further, Nepali business organizations in the private sector are not very export friendly either. There is a general tendency of collecting fee and charges on account of certification and recommendations, particularly for export clearances. These often create rifts and misunderstanding between the exporters and export certifying agencies. A case in point is the demand by the carpet and garment manufacturer to make the certificate of origin optional at the discretion of exporters for the countries importing under the generalized system of preferences (GSP), which do ask for certificate of origin if GSP certifications are available. Similarly, the textile association is charging a fee for export of readymade garments which serves no other purpose other than collecting resources to run their organization. Such behavior should be discouraged if we are to revive the ailing garment industry in Nepal.
Transport operators, freight forwarders and customs brokers are the key players in international trade logistics. Capacity enhancement of these entities is crucial in improving the performance of logistics services. Keeping them abreast of the changes taking place in the domain of trade logistics and market behavior are crucial for bringing efficiency into their operation. Reform in the legal regimes to create liability for the road and rail transport haulers and development of capacity to successfully carry out such liabilities are sin qua non for indemnifying the exporters and importers from the risk associated with intermodal transport of goods. The use of outdated transport vehicles should be discouraged, and a suitable incentive package should be introduced to encourage the use of modern fleet of transport.
Nepal has slipped to 151st position out of 155 countries in 2012 from 147 in 2011, according to the World Bank logistics performance index.
Introducing efficiency in trade logistics of Nepal also calls for quick improvement in transit operation. The movement of transit traffic to and from the port of Kolkata is heavily dependent on a number of intermediaries like, customs house agents (CHA) who deal with Nepal cargo, Container Corporation (CONCOR) of India, truckers and the Nepali freight forwarders who represent the country’s exporters and importers in the delivery of trade goods. Efficiency of the port and port customs operation and rationalizing the free time allowance by the shipping lines agents in Kolkata can bring down the cost of transaction. Invariably, Nepal-bound goods have been paying detention charges due to insufficient turn around free time allotted by the shipping lines. Delays at ports, congestion and inadequate working days/hours of the customs and port authorities often lead to unwarranted detention of the goods at the port. Connectivity of EDI between port customs and land customs stations in India and Nepal is nonexistent, despite it being imperative to reduce the dwell time and track and trace the consignment en-route.
It is strongly felt that operational guidelines for movement of transit traffic between the port of Kolkata and Nepal’s land customs need to be developed and implemented. Such guidelines should clearly delineate the roles and responsibilities of the various stakeholders involved in transit movement. Transit movement is exclusively guided by the bilateral agreement concluded between the government of Nepal and India in their transit treaty, protocol and memorandum. Hence, any changes in the existing procedures would require the bilateral understanding and modifications in the existing rules. This requires a constant persuasion by the government of Nepal to improve the terms and conditions of the transit movement without undermining the legitimate interest of the transit country.
Improvement in the logistics performance index cannot be achieved overnight. This requires a deep reform of the domestic institutions and practices on one hand, and pragmatic diplomacy in dealing with the transit country for achieving a win-win situation on the other.