TERM PAPER

"STRATEGIES TO PROMOTE NEPALESE

PRODUCT OVERSEAS"

Foreign Trade and Status of Nepal's International

Market
Foreign trade represented more than 50% of the Nepalese GDP in 2009. Although state policies
have been modified with the changes of government, the country seems to be very eager to open
its economy. As a matter of fact, the Nepalese government is showing a special interest in
establishing an export-oriented economy. Companies exporting more than 90% of their goods
are exempted from custom duties, excise duties and sales taxes. However, there are major
barriers to the development of trade, such as lack of skilled labor force, low level of advanced
technology, difficult geographical accessibility, limited domestic market and high import duties
(which can reach 140%).

Prior to the seminal work of Oviatt and McDougall in 1994 where they pointed to the
intriguing fact that internationalization can be viewed as an entrepreneurial act, the
Prior to the seminal work of Oviatt and McDougall in 1994 where they pointed to the
intriguing fact that internationalization can be viewed as an entrepreneurial act, the
Prior to the seminal work of Oviatt and McDougall in 1994 where they pointed to the
intriguing fact that internationalization can be viewed as an entrepreneurial act, the
Prior to the seminal work of Oviatt and McDougall in 1994 where they pointed to the
intriguing fact that internationalization can be viewed as an entrepreneurial act, the
Prior to the seminal work of Oviatt and McDougall in 1994 where they pointed to the
intriguing fact that internationalization can be viewed as an entrepreneurial act, the
Prior to the seminal work of Oviatt and McDougall in 1994 where they pointed to the
intriguing fact that internationalization can be viewed as an entrepreneurial act, the
Several studies from the 1970s (see, e.g. Johanson and
Wiedersheim-Paul, 1975; Bilkey and Tesar, 1978) supported the notion that firms
initially gain a strong foothold in their domestic market before they leap into
international markets. Hence, international business research mainly focused on
established firms whereas the entrepreneurship literature focused on domestic market
dimensions (Oviatt and McDougall, 1994). This is no longer the case. Over the past
decade the literatures on entrepreneurship and internationalization have been more
closely related in terms of the effort to describe and understand the phenomenon of
infant firms that operate internationally right from inception.
Advances in information, communications, and transportation technologies, coupled with the
intensified use of the internet and social media on a worldwide scale, have been responsible for
increasingly breaking the barriers faced by many firms in operating beyond national boundaries
(Javalgi, Todd, Johnston, and Granot 2012). This is particularly true for resource-constrained
firms, especially those of small-tomedium size (SMEs), which now have the motive, flexibility,
and swiftness to exploit opportunities and confront challenges in foreign markets more
effectively and efficiently than ever before (Lituchi & Rail, 2000; Moen, Endresen, and Gavlen
2003). New digitalized technologies have indeed revolutionized the way firms are conducting
their business with buyers abroad, by providing significant help in searching for, targeting,
serving, and communicating with customers in any part of the world (Glavas and Mathews 2014)

Historically, for many years Nepal’s trade balance has been in deficit. Even if the exports have
not been greatly hurt by the global economic crisis, the deficit has been deepening following an
increase in imports. Nepal’s main trading partners are India, China, Bangladesh, USA. The
country mainly exports clothing, carpets, handicrafts, leather and jute products, vegetables and
cereals Nepal imports oil and oil products, machinery & equipment and electronics.

Nepal had adopted liberal trade policy in 1992 and the new Trade Policy is announced in 2014.
The foreign trade of Nepal is being directed towards wide range of countries in the world after
Nepal became the member of WTO in 2004. Nepal has trade relation with more than 100
countries. Nepal has identified 19 selected items for exports through its National Trade
Integration Strategy (NTIS) in 2010.

Nepal is facing a problem of ever increasing trade deficit. Import is rapidly increasing but the
increase in export is very low. Nepal is facing trouble to take the advantage of globalization in
trade. Nepal is a low-income, developing nation with an estimated GDP of $33.7 billion and per
capita annual income of $1,155.10 in fiscal year (FY) 2019/20 (Nepal’s fiscal year runs from
July 16 to July 15).  Nepal’s estimated population is 29.14 million (male 13.35 million and
female 15.79 million).  The median age in Nepal is 24.6 and more than half of the population is
under the age of 25, indicating a young nation whose ratio of working to non-working population
will remain high in the years to come.

Nepal was beset with political turmoil from 1996 – 2017, due to an armed Maoist insurgency
until 2006, followed by a decade-long peace process culminating in the promulgation of a new
Constitution in 2015.  Elections under the new Constitution were held in 2017 and a new
majority government took over in 2018.  Nepal’s economic growth lagged behind most of its
neighboring countries due to years of political instability, averaging 4% from 2007-17, compared
to India (7.4%), Bangladesh (6.2%), and Sri Lanka (5.9%). 

Economic growth rebounded with the onset of political ‘normalcy’ in 2018, averaging 7.3% over
the three years 2017-19 prior to the COVID pandemic.  However, the pandemic and associated
lockdowns led to a contraction of the economy by -1.9% in fiscal year (FY) 2019/20.  The
Nepali economy appeared to be recovering from this downturn by the spring of 2021, with the
World Bank making a projection in April of 2.7% growth in FY 2020/21.  With a second
COVID wave beginning late April 2021, such a recovery now appears optimistic. 

Structurally, Nepal’s economy is still highly dependent on agriculture, but the services sector is
the largest contributor to national GDP.  Agriculture accounts for 27.5 percent of GDP and 65.7
percent of employment.  The industrial sector—whose largest sub-sectors consist of
manufacturing and construction—contributes 15.1 percent of GDP.  The services sector—whose
largest sub-sectors include real estate, trade, transport, communications, and education—
contributes 57.4 percent of GDP.

The structure of the Nepali economy is slowly shifting away from agriculture with significant
migration from rural to urban areas and overseas.  An estimated four to six million Nepalis work
abroad, primarily in the Gulf countries, Malaysia, and India.  Nepal received $7.52 billion in
remittances in FY 2019/20, equivalent to 22.3 percent of GDP.  As such, a significant chunk of
Nepal’s wealth is generated abroad through the export of labor (as opposed to the export of
goods and services produced in Nepal).  Although remittances were expected to decline
significantly in 2019/20 owing to the pandemic, they only declined by a nominal 3.3%, once
more proving to be a lifeline to the Nepali economy, even at a time of crisis.

Political instability, widespread corruption, a landlocked location, challenging topography, poor

infrastructure, a poorly trained and educated workforce, and a weak policy and regulatory
environment have been some of the key impediments to economic growth.  Relative political
stability obtained in 2018, a major turnaround in itself, was bringing improvements to some of
the other constraints above, but the pandemic and political infighting have, as of July 2021,
impacted any potential economic turnaround story.  Government messaging has prioritized
infrastructure development, creation of job opportunities at home, and finalization of business
enabling legislation, but the impact on the ground has been modest.  The government professes
to focus on attracting foreign investors to Nepal and organized an international Investment
Summit in March 2019 towards this purpose, yet it has not completed the necessary reforms to
attract large scale investment nor effectively addressed the process challenges faced regularly by
already-present international firms.  The government’s ability to effectively manage the COVID
pandemic and a healthy economic recovery remains an open question.

India accounted for 62 percent ($6.9 billion) of Nepal’s total trade in FY 2019/20, China for 14
percent ($1.57 billion), and the rest of the world for the remaining 24 percent ($2.63 billion).
Compared to 7 years ago (FY 2012/13) when disaggregated records began, China’s share of total
trade with Nepal has grown from 10 to 14 percent.  However, given the pandemic, 2019/20 was
an unusual year for trade, during which Nepal’s total trade declined by 15%.  Nepal imports far
more than it exports.  The imports-to-exports ratio in FY 2019/20  was 12.2 (down from 14.6 the
previous year), i.e., Nepal imported $12.2 for every dollar exported.  However, given the unusual
trade pattern in the past year (owing to the pandemic) Nepali imports declined by -15.6%,
whereas exports increased marginally by 0.6%, per latest Nepal Rastra (Central) Bank (NRB)
data.  This resulted in a trade deficit of $9.1 billion (down from $11.4 billion the previous year),
which equates to 27% of GDP (much improved from a staggering 37% the previous year).  In
2019, Nepal exported $931.5 million worth of goods, mainly palm and soyabean oil, woolen
carpets, polyester yarn, juices, tea and spices (cardamom), textiles, jute goods, readymade
garments, and other apparel items.  Nepal’s annual imports were about $11.9 billion, mainly
from India, China, and Indonesia in 2019.  The main imports were petroleum products (diesel,
petrol, LPG), industrial use items (mainly steel billets), gold, construction equipment and cement
clinkers, rice, and telecommunications equipment. 
U.S.-Nepal bilateral trade was approximately $213.3 million in 2019, roughly 1.5 percent of
Nepal’s total trade with the world, according to data from the Office of the United States
International Trade Commission.  This was a sharp increase from the previous year when total
bilateral trade was $154 million.  This surge was mainly attributable to increased U.S. exports of
agricultural products (soybeans and animal feed).  Major U.S. exports to Nepal have traditionally
been medical and surgical instruments, aircraft machinery and parts, ICT products, electrical
machinery and equipment, and miscellaneous grains, seeds, or nuts (mainly soybeans).  In 2020,
U.S.-Nepal bilateral trade declined to $180 million, but this decline is consistent with the overall
decline in total trade due to the pandemic.

As in previous years, the United States was the second largest export market for Nepal in 2020,
accounting for 10.2% of its total exports (India was the largest, accounting for over 70%).  Until
2018, the United States was one of the very few countries with which Nepal had a trade surplus.
Key Nepali exports to the United States are carpets, handicrafts and antiques, animal feed (dog
and cat food), textiles, glassware, and apparel (shawls, scarves, other knit material, and felt
products).  In December 2016, the United States established a new stand-alone trade preference
program for Nepal, as mandated by the Trade Facilitation and Trade Enforcement Act of
2015.  Designed to help support Nepal’s economic recovery following the 2015 earthquakes, this
program gives duty-free access to the United States for some products made in Nepal, including
certain kinds of carpets, headgear, shawls, scarves, handbags, and suitcases.  

Until recently, Nepal’s long-standing trade deficit was balanced by sufficient inflows of
workers’ remittances (mainly from the Gulf, India, and Malaysia) to maintain a surplus or
balanced current account.  The increase in the trade deficit has outpaced remittance inflows since
FY 2016/17, when the current account was in deficit by only $95.4 million.  By FY 2018/19, the
current account deficit had ballooned to $2.3 billion.  The Government of Nepal argues that the
import of intermediate goods, to feed growing industries dormant during the political transition,
is partly responsible for the rising trade deficit; and that as these investments produce a payoff in
the coming years, the deficit will slowly rebalance.  The government also expresses confidence
that the number of hydropower plants coming online in the next couple of years will reduce
electricity and fuel imports from India, further reducing the trade deficit.  During 2019/20 the
NRB tried to maintain foreign exchange reserves by curbing imports of perceived luxury goods
by raising duties and imposing outright import bans in some cases.  

The sharp decline in trade, particularly imports, over the past year due to the pandemic, and
fairly buoyant remittances have improved Nepal’s trade balance, and its current account deficit
declined to $289 million.  As a result, Nepal’s foreign exchange reserves rose to $10.6 billion in
FY 2019/20 (enough to sustain 12.3 months of imports) versus $8.6 billion (7.6 months of
imports) in 2018/19.  While Nepal’s external payments and foreign reserves situation currently
appears stable, businesses interested in Nepal are advised to monitor these indicators as a
potential macroeconomic vulnerability. 
Ease of Doing Business
Historically, Nepal has attracted little Foreign Direct Investment (FDI) relative to comparable
countries.  As per World Bank data, FDI as a percentage of GDP from 2014 - 18 stood at 0.4%
for Nepal compared to 1.6% for South Asia and 3.5% for Low Income Countries (LICs)
worldwide.  Annual FDI inflows into Nepal, which rose from $125 million in FY 2016/17 to
$168 million in FY 2017/18, dropped to $116 million in 2018/19, and rose again to $167.7
million in 2019/20, according to the NRB.  While there has been growing interest from foreign,
especially Chinese, investors in Nepal ,the pandemic may slow FDI into Nepal in the near
term.  An NRB report shows that the total stock of FDI in Nepal as of July 2019 was $1.62
billion, of which the U.S. share was 2.4 percent ($39.7 million). 

Nepal’s ranking in the World Bank’s Ease of Doing Business rankings improved from 110 in
2018 to 94 in 2020, raising it from fourth to third ranked in South Asia.  The World Bank notes
improvements in the process for receiving permission to do business in Nepal including
improvements in credit mobilization, international trade, and contract formation.  According to
this World Bank indicator, Nepal is an easier place to do business compared to neighbors
Pakistan and Bangladesh, but more difficult than in India and Bhutan.

The 4 Ps of Marketing
The four Ps are product, price, place, and promotion. They are an example of a “marketing mix,”
or the combined tools and methodologies used by marketers to achieve their marketing
objectives. The 4 Ps were first formally conceptualized in 1960 by E. Jerome McCarthy in the
highly influential text, Basic Marketing, A Managerial Approach . There, McCarthy noted that
while the text of the book was  “similar to that found in the traditional texts, the approach is not.” 

McCarthy’s novel approach was influenced by the still-recent “marketing mix” concept, which
Harvard Business School professor Neil. H. Borden popularized in the 1950s. In fact, Borden
himself had been influenced by a 1948 study written by James Culliton, in which the author
equated business executives to “artists” or “mixer[s] of ingredients” . Rather than using the same
approach for every situation, then, Culliton and Borden recognized that successful executives
instead mixed different methods depending on variable market forces. 

McCarthy streamlined this concept into the four Ps—product, place, price, and promotion—to
help marketers design plans that fit the dynamic social and political realities of their time and
target market. In effect, the purpose of the four Ps remains the same today as when McCarthy first
published his book: “developing the ‘right’ product and making it available at the ‘right’ place
with the ‘right’ promotion and at the ‘right’ price, to satisfy target consumers and still meet the
objectives of the business”. 
International Marketing and Strategies
International marketing is the process of marketing your products or services to an audience
beyond your own country’s borders. Also known as global marketing, international marketing
requires a lot more research and planning than domestic marketing.

What are the benefits of international marketing?

The main benefit of international marketing is that it helps you reach potential customers around
the world. We can use international marketing to raise global awareness of Nepalese brand or
target customers in specific countries.

When we have customers in multiple countries, your revenue stream isn’t dependent solely on
economic and buying trends in your home country.

1. Identifying the goals

2. Knowing the clients
3. Creating message
4. Defining budget
5. Determine channels
6. Measuring the success

International marketing strategies to consider

Few are the few marketing strategies to promote Nepalese product in International Market:

1. Exporting

Exporting your product directly to customers abroad allows you to enter a new market without
totally transforming the way you do business. Exporting may be a good approach if you can
handle the marketing and shipping costs.

2. Franchising

Similar to fast food or retail franchise, this concept is simple: Someone else pays for the
opportunity to sell your product locally or on your behalf. You determine the franchising rules,
but international franchising also requires you to create agreements that conform to laws in the
foreign location.
 3. Licensing

Similar to franchising, licensing allows a business partner to sell your intellectual property or
brand in exchange for a fee.

4. Piggybacking

Through piggybacking, you essentially allow a larger, non-competing business to sell your
product as part of their inventory. Think of this almost as a form of channel sales, but it requires
a lot of trust in how your products will be marketed abroad.

5. Joint ventures

A joint venture represents a business partnership where two companies come together to create a
unique product or service. Although this requires the most risk of the options above, it also has
great potential for returns (both of which are shared by the parties involved).

REFERENCES

International Trade Administration report, USA (2021). Discusses key economic indicators and
trade statistics, which countries are dominant in the market, and other issues that affect trade.

Lituchy, T.R. and Rail, A. (2000). Bed and breakfasts, small inns, and the internet: The impact of
technology on the globalization of small businessesî, Journal of International Marketing, Vol. 8
No. 2, pp. 86-97.

Javalgi, R.G, Todd, P.R., Johnston, W.J. and Granot, E.(2012). Entrepreneurship, muddling
through, and Indian Internet-enabled SMEs. Journal of Business Research, 65 (6), pp. 740-744.

Moen, ÿ., Endresen, I. and Gavlen, M. (2003).Use of the Internet in international marketing: A
case study of small computer software firms. Journal of International Marketing. 11 (4), pp. 129-
149.