Cross-Border Transactions in Nepal

Cross-border transactions, which refer to the exchange of goods, services, and money across national borders, are essential for Nepal's economic development and integration. Nepal is a landlocked country that relies heavily on trade with its neighboring countries, especially India and China, for its imports and exports. However, cross-border transactions in Nepal face many challenges and barriers, such as high costs, delays, inefficiencies, risks, and regulations.

One of the main challenges for cross-border transactions in Nepal is the lack of adequate infrastructure and facilities at the border points. Nepal has 26 official border points with India and 6 with China, but most of them are poorly equipped and congested. This leads to long queues, waiting times, and congestion fees for traders and transporters. Moreover, the border points lack adequate security, customs clearance, quarantine, testing, and warehousing services, which increase the risk of theft, damage, fraud, and contamination of goods.

Another challenge for cross-border transactions in Nepal is the complex and cumbersome procedures and documentation requirements. Nepal has to comply with the rules and regulations of its trading partners, as well as its own domestic laws and policies. For example, Nepal has to follow the transit treaty with India, which allows Nepal to use Indian ports and routes for its third-country trade. However, this treaty imposes various restrictions and conditions on Nepal's transit trade, such as the use of specific routes, modes of transport, ports of entry and exit, customs transit declaration (CTD), escorts or supervision by Indian customs officers, etc. These procedures and documents increase the time and cost of cross-border transactions for Nepali traders.

A third challenge for cross-border transactions in Nepal is the lack of digitalization and innovation. Nepal has not fully adopted digital technologies and solutions that can facilitate cross-border transactions, such as electronic data interchange (EDI), single window system (SWS), blockchain technology, etc. These technologies can help reduce the paper-based processes, enhance the transparency and traceability of transactions, improve the efficiency and accuracy of data exchange, lower the transaction costs and risks, and increase the competitiveness of Nepali traders.

However, despite these challenges, there are also opportunities for cross-border transactions in Nepal. Nepal has been taking various initiatives and measures to improve its cross-border trade facilitation and performance. For example:

•  Nepal has been implementing various trade-related reforms under the World Trade Organization (WTO) Trade Facilitation Agreement (TFA), which aims to simplify and harmonize the procedures and requirements for cross-border transactions.

•  Nepal has been participating in various regional cooperation platforms and agreements, such as the South Asian Association for Regional Cooperation (SAARC), the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), the Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicles Agreement (MVA), etc., which aim to enhance the connectivity and integration among the member countries.

•  Nepal has been exploring new markets and opportunities for its exports, such as organic products, handicrafts, tourism services, etc., which have high demand and value in the global market.

•  Nepal has been developing new infrastructure and facilities at its border points, such as integrated check posts (ICPs), dry ports, inland container depots (ICDs), etc., which can improve the capacity and efficiency of cross-border transactions.

•  Nepal has been adopting new technologies and solutions for cross-border transactions, such as digital payment systems (e.g., Unified Payment Interface or UPI), digital identity systems (e.g., National Identity Card or NIC), blockchain-based platforms (e.g., Finance Against Remittances or FAR project), etc., which can enable secure and convenient cross-border transactions.

By addressing these challenges and seizing these opportunities, Nepal can enhance its cross-border transactions performance and potential. This can help Nepal achieve its economic growth and development goals.