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Nepal-Bangladesh trade pact stuck over other duties or charges

The Kathmandu Post | 10 March 2021

Nepal-Bangladesh trade pact stuck over other duties or charges

by Krishana Prasain

Bangladesh said it was open to negotiations on the issue of other duties or charges (ODC) on listed goods while repeatedly deferring signing the first preferential trade agreement with Nepal.

Nepali officials said a deal between the two neighbours was unlikely until the ODC is dropped to zero. The ODC is normally added as an indirect cost.

The proposed preferential trade agreement gives preferential access to certain products by reducing tariffs, but due to the ODC, it does not abolish them completely. Providing duty-free quota-free access to Bangladeshi products without removing the ODC on Nepali products will not benefit Nepal, according to officials.

As Bangladesh is an initial member of the World Trade Organisation, it is permitted to levy ODC. After adding ODC on top of the tariffs on goods exported from Nepal, total charges could come up to 130-132 percent, the official said.

The plan to sign a preferential trade agreement at the end of December last year did not materialize as the issue of ODC remained unsolved.

The sixth Nepal-Bangladesh commerce secretary-level virtual meeting on trade and economic cooperation held last October had agreed to sign a bilateral preferential trade arrangement by 2020-end.

“The chances of concluding a preferential trade agreement are slim,” said an official at the Ministry of Industry, Commerce and Supplies, who wished not to be named.

As per the technical committee formed by the Industry Ministry to finalize the list of goods,

Among the 42 goods proposed to be listed by Bangladesh, 30 are included in the South Asian Free Trade Area’s (SAFTA) sensitive goods list. Another five goods are medicine related products while the Nepal government has a policy to protect domestic medicinal industry.

As a least developed country, Nepal can levy tariff on certain goods and cannot waive duty on them. The Industry Ministry has written to Bangladesh proposing to list 20 goods taking this provision into consideration.

“The Bangladeshi side has said that it is flexible regarding other duties or charges, and is ready to discuss the subject. But we are for eliminating the charges completely,” said Prakash Dahal, joint secretary of the Ministry of Industry, Commerce and Supplies.

“There will be no deal even if the ODC is fixed at 5 percent,” he added.

Officials said that Bangladesh planned to invite President Bidya Devi Bhandari to its Independence Day celebration on March 26, and there is talk that the preferential trade agreement could be signed at that time.

"But Bangladesh has not sent its final list of goods," Dahal said.

There is talk that a trade meeting has been scheduled for next week or March 22 to discuss the issue, sources privy to the matter said.

Earlier, the Bangladeshi commerce minister had said that they were positive regarding the ODC issue which the Nepali side has put forward as a major condition before signing the pact.

According to Dhakal, the commerce minister said that their thoughts were progressive regarding the ODC.

“But we are not clear what that means. Will Bangladesh remove the ODC completely or only by some percentage ? They need to be clear on that,” said Dahal.

According to an Industry Ministry official, the agreement is more beneficial to them. “Offhand, I would say that we will lose the revenue we are currently collecting if we sign the agreement without eliminating the ODC."

Dahal said, "Concluding the pact without any benefit is pointless. Nepal’s exports to Bangladesh are small, and we have fewer exportable products too.”

According to the Department of Customs, Nepal imported goods worth Rs3.07 billion in the first seven months of the current fiscal year from Bangladesh. Shipments to that country during the same period were valued at Rs367.69 million.

In fiscal 2019-20, Nepal shipped goods worth Rs954 million to Bangladesh while it bought more than five times that amount from there. That year, imports from Bangladesh were valued at Rs5.29 billion.

Nepal has had a trade deficit with Bangladesh since 2014-15.

 source: The Kathmandu Post