By: Rajan Sharma:

President : Nepal Freight Forwarders

Association.
¨ Logistics Industry in Nepal.
¨ Industries Opportunities and Strengths.
¨ Key challenges in the development of the
Industry in Nepal and the region.
¨ Action taken under Public/Private initiative to
overcome the challenges.
¨ Suggestions/Recommendation
¨ Conclusions
Item Value Nepal India Bangladesh Pakistan Bhutan OECD
average

Global ranking Number 171 127 119 85 172 -

Exports
Cost of exports US$ per 1,975 1,112 1,025 660 2,2250 1,028
TEU 0

Time Days 41 16 25 21 38 10
Documentation Number 11 9 6 8 9 4

Imports
Cost of imports US$ per 2,095 1,120 1,430 660 2,230 1,080
TEU

Time Days 38 16 34 21 38 10
Documentation Number 11 9 8 8 12 5
3
Stage Exports Imports
Procedures Time Cost Cost (%) Time Cost Cost (%)
(Days) $/TUS) (Days) (US$/TEU)
Documents 14 300 15 14 270 13
preparation
Customs clearance 4 300 15 5 300 14
and technical control

Ports and terminal 4 275 14 6 275 13

handling
Inland transportation 19 1,100 56 13 1,250 60

Total 41 1,975 100 38 2,095 100

4
Country Nepal India Bangladesh(a) Pakistan South Asia
Regional Average
Ranking 151 46 79 71 -

Score 2.04 3.08 2.74 2.83 2.49

Efficiency of clearance 2.20 2.77 2.33 2.85 2.22

process

Quality of trade and 1.87 2.87 2.49 2.69 2.13

transport related
infrastructure

Ease of arranging 1.86 2.98 2.99 2.86 2.61

competitively priced
shipments

Competency and 2.12 3.14 2.44 3.58 2.33

quality of logistics
services

Ability to track and 1.95 3.09 2.64 3.14 2.53

trace assignments

Timeliness of shipment 2.21 3.58 3.46 3.14 3.04

reaching destination
5
Importers Exported value Exported value Exported value Percentage of
in 2009 in 2010 in 2011 all exports
World 885,999 834,017 907,634 N/A
India 562,810 546,018 614,379 68%
United States of 63,085 52,945 70,282 8%
America

Germany 35,972 32,718 40,902 5%

Bangladesh 60,840 46,165 26,037 3%
United Kingdom 18,466 16,806 19,816 2%
France 14,957 15,822 15,632 2%
Canada 10,273 10,510 11,627 1%
Italy 10,999 9,800 10,629 1%
China 23,868 13,803 10,214 1%

Japan 7,396 7,583 9,180 1% 6

Exporters Imported value Imported value Imported value Percentage of
in 2009 in 2010 in 2011 all imports
World 3,754,389 5,127,544 5,915,923 N/A
India 2,131,931 2,920,908 3,751,681 63%
China 421,385 536,369 689,895 12%
United Arab 44,524 456,777 328,778 6%
Emirates
Indonesia 107,051 110,696 115,199 2%
Thailand 85,717 102,639 101,132 2%
Argentina 83,655 68,884 99,224 2%
Republic of 38,162 80,491 82,132 1%
Korea
Malaysia 63,131 57,541 71,486 1%
United States of 49,181 73,720 61,583 1%
America
Saudi Arabia 112,134 25,068 52,336 1% 7
 Bilateral Treaties and Agreements
¨ India /Nepal Trade and Transit treaties
¨ The railway Agreement India/Nepal,
¨ Road service agreement with Bangladesh (yet to signed)
¨ Trade and Payment Agreement in 1982 with China.
¨ Nepal China Agreement on Road and Other Related Matters, 2002;
¨ Nepal Bangladesh Transit Treaty, 1976;
Regional Agreements :
¨ SAARC , The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic
Cooperation (BIMSTEC) ,South Asia Preferential Trading Arrangement (SAPTA)
,SAFTA,SATIS
¨ Multilateral Agreement ; Nepal became the 147th member of the World Trade
Organization (WTO),
Acts: Warehouse act under preparation, MTO Act: Needs amendment.
¨ Insurance Act: needs Amendment, Industrial Enterprises Act and Foreign Investment
and Technology Transfer Act (FITTA)-underway,Railway Act
§ Customs Laws and regulations , Private Financing Act 2006-BOT, Land
Acquisition Act-1977, Environment Protection Act/Rules-1997, Export and Import
Act-1957, Motor Vehicle Act-1993,Labor Act-1992

Institutions: NTTFC, Nepal Inter-modal Transport Development Board (NITDB)

¨ Road Board Nepal ,Industrial Promotion Board (IPB),Civil Aviation Authority of
Nepal ,Department of Transport Management.

8
 TAB Rank 2012: 170
TAB Rank 2013: 171

41 Days to Export: Transit Kolkata Port 38 Days to Import: Transit Kolkata Port

Procedure to Da % of Cost % of Procedure to Da % of Cost % of

Export ys Total US$ Total Import ys Total US$ Total
Document Document
Preparation 14 34.15 300 15.19 Preparation 14 36.84 270 12.89
Customs
Customs
Clearance and
Clearance and
Technical Control 4 9.76 300 15.19 Technical
Control 5 13.16 300 14.32
Port and terminal
handling 4 9.76 275 13.92 Port and terminal
handling 6 15.79 275 13.13
Inland
transportation Inland
and handling 19 46.34 1100 55.70 transportation
Total 41 100.00 1975 100.00 and handling 13 34.21 1250 59.67
Total 38 100.00 2095 100.00
 Region BT GR ER Total
Eastern 948.19 1133.85 1480.17 3562.21
Transport vehicles used for Central 2218.83 1851.88 2634.92 6705.63
road movement of cargo are Western 1216.16 394.03 1517.85 3128.04
very traditional. The Mid- 490.37 815.97 1098.56 2404.9
Trailers and flat cars to Western 399.49 417.52 662.78 1479.79
carry containerized traffic Far-
are very few and not readily Western
available at the gateway Total 5273.04 4613.25 7394.28 17280.57
port for International or Note:
bilateral cargo. BT=Bitu ER= Governm
minous, Earthen. ent of
GR=Grav Source: Nepal.
eled, DOR,

10
¨ Jayangar in India to Janakpur 42 km rail line
which basically carries the passenger traffic.
¨ The Raxoul of India and Birgunj ICD in Nepal,
a stretch of 5.4 km for goods traffic. This being
the broad gauge line has made it possible to
link with all major cities in India including
ports. The distance between Birgunj and
Kolkata port is about 704 km and between
Birgunj and Haldia port is about 832 Km.

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¨ Air service plays an important role in international trade particularly
for Nepal. The high value and perishable commodities are traded
through air routes. Domestic air transport has a significant place in the
transportation of goods to and from the hinterland and remote areas.
Currently, there are altogether 53 airports in Nepal, of which only 32
are in operation. Altogether 10 air fields including one international
airport have got the bituminous paved runways. A second
international airport has been planned to be constructed in Nijgadh.
There are 37 STOL (short take-off and landing) airports that handle
small aircrafts.
¨ Civil Aviation Authority of Nepal has issued Airline Operation
Certificates to 47 airline companies. But only 20 airlines are operating
their air service. Of them, 5 airlines are related to recreation and
aviation sports and 5 companies are providing helicopter service in
the supply of food, clothes, medicine and construction materials to
hilly and Himalayan regions.

12
¨ The TIA customs has a modern cargo complex of adequate
area. But it is not well managed. There is frequent shortage
of power supply in TIA cargo complex. The power shortage
is affecting continuous working environment and operation
of X-ray scanning and weighing equipment.
¨ Birgunj ICD has all facilities of handling all types of traffics
including containers, bulk and break cargo.
¨ Birgunj customs has three warehouses; one for exports and
two for imports. Of these three warehouses, one belongs to
National Trading Limited, a state owned trading company
and two belong to NTWCL.
¨ The Biratnagar ,Bhairahwa warehouse is handled by the
terminal operator.
¨ The Kakarvitta is handled by NTWCL.

13
 Offices North South Total
Main Customs 9 20 + Airport+ PCA =22 31
Total Staff 1273
Sub Customs 6 136+ Post office = 137 143

Total Customs 15 159 174

14
Reform Initiatives
§ Preparation for the Accession to the Revised Kyoto Convention.
§ Optical Fiber Connectivity – 11 Major Customs (2012)
§ Installation of IP Camera (2011/12) – 4 Major Customs
§ Webbased Customs Valuation system for third country import
Cargo,
§ Development of Customs Reporting software.
§ Establishment of separate Customs Reform and Modernization
Section
§ Conducted Organization& Management study.
§ Study commenced for the development of e-Customs Master Plan,
Infrastructure Development Master Plan, HR Development
Master Plan, and Integrated Laboratories.
§ Development of 5 Modules to support ASYCUDA clearance
namely, Agent's Module, Risk Management System, Valuation
Database software, Data Warehouse and Passenger Clearance
System.
§ Tatopani, Tribhuvan Airport, Nepalgunj, Bhairahawa, Kakarvitta,
Biratnagar and Birgunj are the major customs. Birgunj customs
alone accounts for 70 percent of total trade.
¨ Dry Ports Accomplished: Birgunj, Bhairawaha
,Kakarvitta, Biratnagar
¨ Dry Ports under design and feasibility study.

a. Rasuagahdi ( ICD)
b. Dodhara Chadani (ICD)
c. Kathmandu (CFS)
* Larsa (China Boarder under construction)
* ICP’s= 4 under construction; Birgunj,
Biratnagar ,Nepalgunj, Bhairahawa

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¨ Kolkata/Haldia (
India),Kakarvitta,Birgunj,Biratnagar,
Bhairahawa and Nepalgunj
¨ Benapole/Petropole( B’desh/India) **
¨ Radhikapur/Birol (India,B’desh)
¨ Fulbari/Banglaband (India/B’desh)
¨ Rohanpur/Singabadh (B’desh/India)
¨ Kalarvitta Via Panitanki to Phunchulung
(Nepal/Bhutan)
¨ Tatopani/Khasa (Nepal/China)
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¨ Total members:120 and 5 associate members.
¨ Executive Board: 15
¨ Representation in Government:
¨ 1.NTTFC
¨ 2.NITDB
¨ 3.Custom Trade Facilitation committee
¨ 4.FNCCI
¨ 5.Chambers
* STD and CoD of NEFFA with international
Liability/standard.
* Membership criteria: at least one years of non dispute
in trade.
* International Membership ? ?
* Sustaining with membership fee.
18
¨ The majority of the companies in the industry are
small or medium, with fewer than 7 to 35
employees. The implication is that they might lack
the operations scale and resources to offer an
advanced value-added logistics services. This
point to the possibility of merger and alliances as a
means of achieving scale economies and
improving services in the industry.
¨ There is need of capacity enhancement from
foundation service providers to 3PLs,LLP’s to
SCIs, LLMs.

19
¨ Companies in the industry are highly capable of
providing traditional logistics services such as
freight forwarding, direct transportation service,
warehousing, customs clearance; but they seem to
be lack of the capability to provide other value-
added logistics services such as purchasing service
which is expected of an advanced 3PL service
provider. Perhaps this is because many of them are
small and lack of the financial strength to invest in
the physical assets and capital-intensive
information technologies needed to provide such
service.

20
Procedures and Documents at Kolkata Port

• 37 Steps
• Nine
Documents
required at
Kolkata
Customs by
Rail or Road.

21
¨ In order to work out a smooth and speedy transit cargo
movements followings needs to be done:
In case of transit traffics through India:
- (a) it is necessary to implement transshipment modality from
Kolkata to Birgunj ICD and same for trade via Bangladesh.
- (b) most modern and acceptable modality should be developed
for simplification and harmonization of customs and transit
procedures,
- (c) automation in the gateway port and border customs point in
Nepal should be established for the exchange of transit
documents and other related information, and
- (d) corridor monitoring system (CMS) should be introduced for
railway as well as truck movements in order to reduce risks of
pilferages and thefts and also reduce dual time and turnaround
time.
- (e) competition with courier companies.

22
¡ In view of the incompatibility of railway tracks and wagons between India
and Bangladesh, commercial viability of using railway transport for Nepali
cargoes movement in an immediate future is minimal.
¡ In the long term, uses of railway mode of transport might be viable only
when Bangladesh can modify its railway services compatible with the
Indian systems and infrastructure and CFS to receive and handle Nepali
cargoes at the border crossing point/s.
¡ Considering the nature and volume of existing Nepali cargoes, among the
six border-crossing points ,the only viable point or route in an immediate
future is the Banglabandha-Phulbari.
¡ Full utilization of this route also required addressing the importing issues
such as: (a) truck conveying and escorting system be uplifted or
eliminated, (b) single document system along with the provision of car
pass for border crossing transit traffics, (c) a substantial improvement in
the infrastructural facilities in Banglabandha, (d) construction of CFS at
Panchagadh for rail-bound cargoes, (e) automatic transfer of cargoes from
Banglabandha and vice versa, and (f) early conclusion of road transport
agreement between Nepal and Bangladesh.
¡ Up gradement of Mongala port.

23
¡ Kakarvita to Phulbari 54 km, Phulbari to Banglaband close,
Banglaband to Panchgadh 53 km.
¡ Excellent facilities in Phulbari, but limited facility in
Banglaband,
¡ Customs documents processing at Panchagadh
¡ Car pass system in place but no immigration,
¡ Panchagadh station has potential but infrastructure needs to
be developed in Panchgadh.
¡ The Phulbari Banglaband corridor seems mort shortest and
viable corridor at present. There is a need to improve the
facilities in the corridor.
¡ Railway link of 40 to 45 Kms till the nearest Broad gaze
station in Bangladesh.
¡ No mechanism to address day to problem as International
calls need to be made ,no mechanism of regular meetings and
visa provision for staffs of customs are complicated

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q Difficult terrene poor transport infrastructure,
¨ Lack of Freighter operation.
¨ India blocked.
¨ Goods carrier Act
¨ Cargo Act
¨ MTO act Amendment
¨ Insurance Act
¨ Non Compliance with the appropriate INCO TERMS.
¨ Problem of delays and uncertainty in trade routs
¨ National Network
¨ loss, damage and deterioration en route, safety and security
¨ Maintenance of infrastructure and monitoring the safety and security concerns.
¨ Too small a market for international interest
¨ Foreign Investment in Transport Logistics.
¨ Too much of Involvement of CHA in Bangladesh and India
¨ High Detention and Demurrage charges
¨ Heavy delivery charges of liners
¨ Lack of consolidation of LCL shipment at Kolkata.
q Lack of involvement of Association related to logistic service by the government in the
policy making mechanism.
25
¨ Majority of NTBs in South Asia are related with
SPS and TBT measures.
¨ Harmonization of standard with support of
each country to achieve the standard is
necessary.
¨ Human resource and skill for accreditation is
necessary
¨ SARSO (South Asia regional Standardization
organization )should take the lead for regional
agreement for mutual reorganization of the test
and certificates.
26
¨ It is a virgin market.
¨ Warehousing and distribution services
¨ ICD management
¨ Railway is just on the womb
¨ Airport and management
¨ Technology introduction
¨ Hub for cargo to Bhutan and other destinations.
¨ Lots of study going on for consultancy
¨ Many NEFFA members don't have agency agreement abroad .
¨ Air Transport for Freighter operation
¨ Investment in Logistic hardware as well as software
¨ Strategic location as Nepal is between India and China.
¨ Opportunity at the sea ports with new agreements at India and
Bangladesh.

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o Policy improvement, improve infrastructure by all modes
of transport, international trade measures (to give
preferential treatment to landlocked countries goods.
Technical and financial international assistance and know
how on policy improvement and infrastructure, monitoring
and following up on agreements).
o The need to ratification of 10 key international
instruments to facilitate transport and trade in the region
like:
Convention of Road Traffic, Convention of Road signs and
signals, Customs convention on the international transport
of goods under cover of TIR Carnet, Temporary imports of
vehicles of customs, Frontier control of goods, Int’l carriage
of goods by road, Int’l convention to facilitate the crossing of
Frontiers for Passengers and baggage carried by rail etc.,

28
¨ Full and inclusive representation of the private sector in trade facilitation initiatives
in essential. The Right Business Support Organization representation.
¨ Implementation of basic trade facilitation measures should be consistently
enforced and re-enforced nation-wide.
¨ Paperless trade, including development of national and regional single windows
and development of trade portal.
¨ Physical inspections should be minimized whenever possible, in particular through
adoption of risk management techniques by all organizations involved in the trade
process.
¨ National trade facilitation performance monitoring mechanism needed to identify
the real and most important barriers to trade efficiency.
¨ Healthy competition among transport, logistics and other trade-related service
providers should be encouraged.
¨ Reviewing payment systems and their efficiency may reveal new opportunities for
improving trade facilitation performance.
¨ Industry-specific trade facilitation program should be considered, in particular for
agricultural product.
¨ Harmonization of documentary requirements across countries should be actively
pursued.
¨ Bilateral and regional free trade agreements should systematically address trade
facilitation issues.
¨ Logistic Performance and Doing Business methodology to be changed for LLDC
like Nepal.
¨ Government has to put forward time and cost reducing procedure like the Subject
to Safe landing and International Transhipment of Goods with India for the port of
Kolkata and ports that will be agreed upon in future like Mongla, Chittagong in
Bangladesh and Visakhapatnam or another ports in India. 29
¨ Transparency: prompt publications and notification of relevant laws,
rules and procedure, etc.
¨ Efficiency: efficiency in administration and discharge of duties.
¨ Mutual assistance: Assistance and co-operation between trade facilitating
institutions.
¨ Support to be provided for upgrading their capacity and infrastructure.
¨ Appeal mechanism: Mechanism for the appeal against administrative
rulings.
¨ Designation of fixed transit transport routes and provision of necessary
facilities
¨ Harmonization of rules, regulations and procedures for goods and
vehicles, including customs procedure and traffic signal/rules, etc.
¨ Mutual recognition of certificates of vehicles’ roadworthiness, driving
licenses, insurance policies, etc.
¨ Adoption of the TIR system or a similar regionally based equivalent
customs transit system.
¨ Effective risk management system.
¨ Effective dispute settlement system.
¨ Creation of national institutions for coordinating the implementation of
agreement.
¨ Special provisions for the transportation of time- sensitive goods such as
drugs and perishable goods.

30
¨ Logistic master plan
¨ Trade facilitation Projects with WB.
¨ Railway
¨ SW, Trade Portal
¨ Commercial labs
¨ Documents and procedure simplification
¨ NTTFC formation

31
¨ Change in the mind set; transit not as one way concessions given to by
India or Bangladesh but an arrangement of achieving the goal of regional
integration through instilling the seamless transport system.
Therefore, it is necessary to free Transit from Political and bilateral issues.
¨ Develop and implement the key regional transport projects for facilitating
the cross border movement of goods and passengers.
¨ Conclude a regional transport agreement in the fashion of ASEAN CBTA-
.
¨ Diversify the transit corridor and create competition among various mode
of transportation.
¨ Encourage the use of through bill of lading or multimodal transport
documents in transportation of trade by a appropriate ‘International
Transshipments’ modality acceptable to all
¨ Create a regional fund for financing the development and improvement
of transport infrastructures in the region. Also upgrade and maintain the
existing infrastructures and facilities.
¨ Enhance cooperation between G2G, G2B and B2B.
¨ Scope of Courier and Cargo to be distinguished.

32
 Conclusions
¨ A lot of room for improvements in trade facilitation for Nepal and the
region
¨ The South Asian Region is home to worst and best TF performers:
much can be gained from regional exchange of knowledge and
experiences as well as support from International donor agencies. But
this needs to be done in a Private sector basis not only with the
Government.
¨ Strong political will as key to making progress on TF issues is needed
from the Nepal Government side as well as the Transit providing
country .
¨ The introduction of Develop Infrastructure related to trade facilitation
i.e : ICDs/ICPs establishment and proper management and
monitoring and evaluation.
¨ Reduction in transit cost/ transit time and Reduction in procedure and
number of documents through automation E-customs, e-Import, e-
export, e-Manifest, e-payment and e-warehousing RFID and National
Single Window system through Cross Boarder Management system.
¨ Help Strengthen the BSO’s related to transport logistics with capacity
enhancement and technology.
33
¨ Transport transit cooperation is an important agenda
in deepening regional integration and connectivity in
South Asia.
¨ There has been a lack of proper business model in the
nation’s infrastructure development. As a result, the
nation’s competitiveness has not been appropriately
enhanced.
¨ Logistics related laws and regulation has NOT been
significantly appropriately amended to help facilitate
imports and exports. Like the Goods carrier act and
amendment in the MTO act, Cargo act Formation ,
Warehouse Act, insurance Act etc.,

34
¨ Regional economic integration in South Asia through
cross-boarder free movement of vehicles might become
a reality soon as SAARC nations are moving closer to
striking a deal.....

¨ ....despite declaring 2010 to 2020 as the “Decade of Intra-

regional connectivity in SAARC", the region is the least
integrated among all the regional blocs in the world...

¨ Increase trade in South Asia- due to more connectivity

will save USD:2 Billion per year by improving
consumer welfare as per study of CUTS..
The Himalayan Times of 30th May 2013.

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