TIFA hopes

It is good that Nepal recently signed a bilateral Trade and Investment Framework Agreement (TIFA) with the US to replace another agreement signed some 65 years ago. However, the domestic business environment is so unfavorable that chances of reaping tangible benefits from the agreement any time soon look extremely slim. Undoubtedly, we do welcome the agreement, as it is a major achievement towards breathing new life into the country’s faltering export sector. More than that, this agreement has been signed at a time when Nepal desperately needs to boost exports to check an unsustainable trade deficit.



One of the important features of TIFA is that it has a provision for a permanent body that will hold meetings at least once a year to take up issues related to bilateral trade and investments. We believe such a body will act as a platform for a small country like Nepal to interact with the world’s largest economy and explore potential areas for trade and investment.



However, we also believe that just signing an agreement is no solution to the huge problems the country is facing. Yes, TIFA promises preferential entry for Nepali products in the giant US market, but sadly we have very few products that hold any promise of being able to compete there.



The domestic situation is such a mess that nothing that the government or the private sector does will work magic for the competitiveness of Nepali products. The chronic shortage of power is the main impediment to the development of the export-oriented sector. To be frank, it is useless to talk about new strategies for boosting exports when the country is facing draconian power rationing with as much as 14 hours of load-shedding a day. The saddest part is that we have no immediate solution to this problem as we all know that bringing a new hydropower project into play requires at least three to five years if implementation takes place without interruption. We have spoken many times about the need to start thinking about hiring moveable diesel plants under dry-lease arrangements. But it seems out pleas are falling on deaf ears.



Another important factor in the eroding confidence of the private sector is the fragile law and order situation. This has become the biggest obstacle in the smooth functioning of a liberal economic policy and tackling supply-side constrains. We urge the government once again to focus on two major issues – alleviating the power shortage and improving law and order – so that agreements like TIFA will bring change to Nepal’s sick export sector.

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