1.

2 Statement of The Problem

Despite Nepal's strategic location between two economic giants,
India and China, and its potential for trade expansion, there
remains a lack of comprehensive understanding regarding the
trends and directions of foreign trade in the country. This study
aims to address this gap by investigating the following key issues:
 Lack of Comprehensive Data Analysis: There is a dearth of
systematic analysis and evaluation of Nepal's foreign trade
data, hindering policymakers' ability to formulate effective
trade policies and strategies.
 Limited Understanding of Trade Patterns: Current
research on Nepal's foreign trade primarily focuses on
macroeconomic indicators, overlooking granular insights into
trade patterns, partner countries, and commodity
composition, which are essential for informed decision-
making.
 Challenges in Trade Diversification: Nepal's heavy reliance
on a few key trading partners and limited export
diversification pose risks to its economy, particularly in the
face of global economic uncertainties and geopolitical
tensions.
 Infrastructure Constraints: Inadequate infrastructure,
including transportation, logistics, and border facilities,
impedes trade efficiency and competitiveness, thereby
constraining Nepal's ability to capitalize on its trade
potential.
 Trade Policy Inefficiencies: There is a need to assess the
effectiveness of Nepal's trade policies and regulations in

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 promoting export growth, attracting foreign investment, and
facilitating trade facilitation.
 Geopolitical Dynamics: Nepal's geopolitical position
between India and China introduces unique challenges and
opportunities for its foreign trade, requiring a nuanced
understanding of regional dynamics and their implications
on trade relations.
 Impact of External Shocks: External shocks, such as natural
disasters, global economic downturns, and health pandemics
like COVID-19, can disrupt trade flows and expose
vulnerabilities in Nepal's trade ecosystem.
 Opportunities for Trade Expansion: Despite the challenges,
there are untapped opportunities for Nepal to expand its
foreign trade, including leveraging regional connectivity
initiatives, enhancing trade facilitation measures, and
promoting export-oriented industries.

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1.3 Objectives of The Study

 To Determine Historical Trade Trends: Analyze historical

data to understand the past trends and patterns in Nepal's
foreign trade, including fluctuations in export and import
volumes, trade partners, and traded commodities.
 To Assess Current Trade Dynamics: Evaluate the current
state of Nepal's foreign trade by examining recent trade
data, including the balance of trade, trade deficits or
surpluses, and the overall health of the trade sector.
 To Identify Emerging Markets and Opportunities:
Identify potential new markets and trading partners for
Nepalese exports, as well as emerging opportunities for
diversification of export products and industries.
 To Examine Trade Policy Impacts: Assess the impact of
trade policies, regulations, tariffs, and trade agreements
on Nepal's foreign trade performance, including their
effects on export competitiveness, import dependency,
and overall trade balance.
 To Evaluate Trade Infrastructure and Logistics: Evaluate
the adequacy and efficiency of trade-related
infrastructure, such as ports, transportation networks,
customs procedures, and logistics services, in facilitating
foreign trade activities.
 To Identify Constraints and Challenges: Identify the key
challenges and constraints hindering Nepal's foreign trade
growth, including structural issues, bureaucratic hurdles,
lack of infrastructure, and trade barriers.

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  To Provide Policy Recommendations: Based on the
findings, provide evidence-based policy recommendations
to enhance Nepal's foreign trade competitiveness,
promote export-led growth, improve trade balance, and
address identified challenges.
 To Forecast Future Trade Trends: Project future trends
and directions in Nepal's foreign trade based on current
data, economic indicators, global market trends, and
anticipated changes in trade policies and geopolitical
dynamics.
 To Contribute to Informed Decision-Making: Provide
valuable insights and data-driven analysis to policymakers,
stakeholders, and businesses to support informed
decision-making processes related to Nepal's foreign
trade strategies and policies.

These objectives aim to provide a comprehensive understanding

of Nepal's foreign trade dynamics, identify opportunities for
growth, address challenges, and contribute to the formulation of
effective policies and strategies to enhance the country's trade
performance and economic development.

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1.4 Significance of The Study

The significance of a study on the trend and direction of foreign

trade of Nepal lies in its potential to provide valuable insights and
benefits to various stakeholders, including policymakers,
businesses, researchers, and the general public. Here are some
key points highlighting the significance of such a study:
 Informing Policy Decisions: The study can provide
policymakers with data-driven insights into the current status
and trends of Nepal's foreign trade. This information can be
instrumental in formulating effective trade policies,
strategies, and interventions to enhance the country's trade
competitiveness and economic growth.
 Promoting Trade Diversification: By identifying emerging
markets, potential trading partners, and opportunities for
diversification of export products, the study can help Nepal
reduce its reliance on a limited number of trading partners
and commodities. This diversification can enhance resilience
to external shocks and contribute to sustainable economic
development.
 Supporting Business Decision-Making: Businesses involved
in foreign trade, including exporters, importers, and
investors, can benefit from the study's insights into market
trends, trade dynamics, and competitive landscapes. This
information can inform business strategies, market entry
decisions, and investment planning, ultimately enhancing
business performance and competitiveness.
 Attracting Foreign Investment: A better understanding of
Nepal's foreign trade trends and opportunities can attract

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 foreign investors interested in tapping into the country's
potential markets or contributing to its trade-related
infrastructure development. This can stimulate economic
growth, create employment opportunities, and foster
technology transfer and knowledge exchange.
 Facilitating Academic Research: Researchers and scholars
can use the study's findings as a basis for further academic
inquiry into various aspects of Nepal's foreign trade, such as
the impact of trade policies, trade relationships with specific
countries or regions, and the role of trade in overall
economic development. This can contribute to the
advancement of knowledge in the field of international trade
and economics.
 Enhancing International Relations: A comprehensive study
on Nepal's foreign trade can contribute to a better
understanding of the country's economic interests, priorities,
and challenges among its international partners. This can
facilitate constructive dialogues, collaborations, and
partnerships aimed at promoting mutually beneficial trade
relationships and regional economic integration.
 Empowering Stakeholders: By providing stakeholders with
transparent and accessible information about Nepal's foreign
trade dynamics, the study can empower them to actively
participate in policy debates, advocacy efforts, and initiatives
aimed at promoting inclusive and sustainable trade
development.
Overall, a study on the trend and direction of foreign trade of
Nepal holds significant importance in guiding policy decisions,
fostering economic growth, promoting trade diversification, and
enhancing the country's integration into the global economy.
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1.5 Limitations of The Study

All research study is done to solve a particular research

problem. It requires various kinds of data, and other relevant
information, which may not be sufficient to the researcher. This
study cannot escape from the frame of limitations.
The study mainly based on secondary data particularly
export/import data provided by concerned department that is not
sufficient for the good research study. This study is mainly based
on secondary data. So, the limitations of secondary data may
exist. It can't cover all data of trade and policies of foreign trade
of Nepal. Simple tools and techniques may be used to analyze the
foreign trade. Being a student cost and resources are constraints.
Due to the short time it could not cover all functions of
foreign trade of Nepal. This study was undertaken for the partial
fulfillment of master’s degree Programed. Although, efforts has
been made to focus on the activities and trade policy of foreign
trade of Nepal. Hence it may not cover all export and import trade
and its related information but the data would be collected and
analyzed secondary data of sampling method of macro basis from
FY 1996/97 to 2005/6.

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1.1 Background of The Study
Nepal is least developed and land-locked country, which
lies between two countries India and China. China is in the North
and India in the remaining three sides. Nepal’s geographical
situation is unique in the sense that other land-locked countries
have an option to choose among two or more countries’ transit
facilities for their overseas trade. But India alone enjoys the
monopoly over overseas transit to Nepal. Chinese port of Canton
is 2800 kilometer from Nepal. So, Nepal is forced to receive the
Calcutta port for minimizing transit cost in relation to trade with
overseas trade.
Nepal lies between the latitude 26º22' to 30°27' North and
80°4' to 88°12' East longitude. Rugged hill and mountain out of 1,
47,181 square kilometer cover more than 83% land. It is 885 Km
long and 193 Km wide (in average). The country is divided
administratively into 5-development regions, 14 zones, 75
districts, 58 Municipalities and 3912 Village Development
Committees. Geographically, Nepal is divided into three regions
called Terai, Hill and Mountain each covering 17 percent, 68
percent and 15 percent respectively. More than 80% people are
engaged directly in agricultural sector and it also has contributed
more than 40% of National GDP and 75% of foreign trade.
Nepal’s planned economy started from the year 1956 BS.
Till now ten five- year plans have been completed. Ten Five Year
Plan has already passed which also included perspective plan (20
years). Despite of a series of ambitious development plans and
assistance from international aid agencies, Nepal’s economic
growth is very low. Macro-economic indicator exhibits Nepal’s
economic status as extremely vulnerable, with a GNI per-capita of
US$ 340, Nepal ranks as one of the poorest countries in the world.
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 Nepal, a small land locked country of Asia, with its per-
capita income $340, is predominantly an agricultural country.
Agriculture is still the main industry in Nepal, but performance in
the sector is dominated by weather condition and constrained by
physical and structural weakness. Due to the lack of irrigation
facilities, improved seeds, modern techniques and equipment
agricultural productivity are low. Almost 80 percent of the active
population is engaged in this sector and producing about 40
percent of GDP

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1.6 Review of Literature

Review of Literature means reviewing the research study or

others relevant report in the related area of the study. Scientific
research must be based on past knowledge. The previous studies
cannot be ignored because they provide the foundation to the
present study. The library is a rich storage base for all kinds of
published materials including thesis, dissertations, and business
report and government publication.
For this research study the related literature survey is done
by consulting various journals, articles, newspapers, thesis, reports
and others more relevant books to foreign trade, concept of
foreign trade, trade policies about Nepal and rest of the world
have been collected compiled and reviewed.
Every possible effort has been made to grasp knowledge
and information that is available from libraries, document
collection centers, other information managing bureaus, and
internet and concern commercial banks.
This chapter helps to take adequate feedback to broaden
the information base and inputs to my study. Conceptual
framework given by different authors, research scholars, etc. in
this chapter is reviewed from the books research papers, annual
reports, and articles etc. This chapter mostly consists of two types
of review i.e. conceptual review and review of previous research
work. Conceptual review provides the concept of foreign trade
and its policies with the theoretical proposition of foreign trade of
Nepal. Review of previous research work includes those thesis and
reports, dissertation and articles of government and non-
government sectors as well as domestic and international
organization or institutions, which are related to foreign trade and
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policies of world and especially of Nepal. Due to the various
constraints only important and relevant literatures are reviewed
which are categorized as conceptual and review of previous
related studies i.e. trade policy, books, papers, articles and thesis
papers.

1.7 Research Methodology

In this study analytical as well as descriptive methodology will be
applied to make the study of "A Comparative Study on the Foreign
Trade of Nepal" more fruitful and effective. The research methodology
is the most necessary part of conducting any research. It provides the
valuable information and data about the concerned study and also
helps for presenting and analyzing the collected information and data.

1.7.1 Sources of Data

Data may be primary or secondary for any research. In this research I
have collected only secondary data through books articles, bulletins,
reports, thesis reports, manual from government and non-government
sources and national as well as international organizations or
institutions. In other words, data would be collected through NRB
reports, TPC reports, MOICS reports, MOF reports and others
government and non-government reports etc.
For the basis of contribution to employment, economic
opportunity, poverty reduction, remittance and national economic
development, foreign employment is being very one of the key sectors.
Further, foreign employment is also an attractive sector for 3/4th adult
those are entering into labor market every year. Since the last decades,
more than 1000 youth are going foreign labor market each day only for

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foreign employment. Nepalese Foreign Employment Act 1985 made
provisions for the matters relating to foreign employment such as
counseling, complain and compensation. National Labour Policy 1999
has dealt the government policies and programs on different labour
issues where the issue regarding the promotion and reliability of
international labour migration is also highlighted to some extent. The
Labour and Employment Policy 2005 faced the existing challenges by
exploring and tapping the new opportunities and potentials of the
labour and employment sectors. The policy aimed to promote
production-oriented employment by eliminating forced labour
practices and make the just, healthy and cardinal labour-related
development

Fig1: GROWTH TRENDS OF FOREIGN EMPLOYEMENT AND

REMITTANCE FROM 2002\03-2018/19

The contribution of remittance to the gross domestic product GDP has

also increased every year. Remittance has played a very vital role in
economic growth in Nepal. In the year 2003 there was a 11.0%
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remittance of GDP and its decrease to 10.9. In 2005 there was a
growth from 11.1% to 14.9%. Similarly in year 2010 there was 19.4%
of remittance of GDP. In 2019 and 2020 there was 22.4 and 22.47% of
remittance of GDP. Over the year, remittance has made a great
contribution to the GDP. Remittance also has a great percentage of
clear and current account And current transform income.

Fig2: CONTRIBUTION OF REMITTANCE RATIO TO GDP FROM

2001/02-2019/20

The above table shows us that, in the yours 2016. There was 60.6% of
remittance here to the current account and 81.3% of this year of
remittance to current transfer income. Likewise, there was 62.4%.
63.7%. 66.3% And 70.6% of remittance years to the current account
and 86.7%, 87.4%, 88.6%, 89.2% of remittance year to current transport
income in Fiscal year 2018, 2019 and 2020 respectively. Due to lack of
skill and knowledge, they have to risk their life to earn. Therefore, many
Nepalese labor died in foreign country due to risk in work and due to
other problems as well. There is detailed information about the number
of deaths in foreign employment

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1.7.2 POPULATION AND SAMPLE

Fig3: foreign employment of Nepalese worker

In pie chart we can see the migration of Nepalese level to different

countries of the world. Most of the Nepali workers are working in
Gulf countries. Qatar is the first destination of Nepalese labor,
followed by Malaysia and South Arabia. Qatar, Malaysia, and South
Arabia are the top three destination for foreign employment of
Nepalese labor. More than 60% of Nepalese worker are working in
these top three places. But nowadays, the destination of Nepalese
live work seems to be changing and devising towards other country.
Like Japan, South Korea, Australia. Canada. Etc.

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1.7.3 Method of Data Collection
The development of international standard methodologies on the
measurement of internal labour migration should take into account the
existing national data sources and current country practices. It should
build on the strengths of cost‐effective data sources and successful
country practices. The 20th ICLS guidelines on statistics of international
labour migration distinguish the sources of stocks and flows as follows:

(a) sources generating stock statistics: population censuses; household

surveys, in particular labour force surveys (especially relevant for
certain groups (usual residents) of international migrant workers);
specialized migration and demographic surveys; surveys limited to, or
focused on, particular populations or domains (such as surveys near
international borders, surveys of refugee camps); and establishment
census and sample surveys;
(b) sources generating flow statistics: border registrations; statistics of
residence permits issued; statistics of work permits issued, statistics of
visas issued; departure registrations; and household surveys; (c) sources
that can generate both flow and stock statistics: population registers;
household surveys, registers of foreigners; tax and social security
registrations; and registrations for use of utilities (e.g. phone,
electricity);

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Fig 5 Information about foreign job opportunity

In this table it is shown that how often do people seek information

about foreign job opportunities.

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1.7.4 Method of Data Analysis
Data has been analyzed through quantitative as well as qualitative
techniques. For analysis of the data various statistical and mathematical
techniques would be used. The collective data has been categorized,
edited, coded, classified, tabulated, processed and analyzed by using
different methods. The financial, accounting and others necessary tool
have been used. Here are some common data mining techniques used
in analyzing foreign employment:

1. Association Rule Mining: Identifying relationships and patterns

between variables, like education level and job opportunities.

2. Clustering: Grouping similar data points to identify clusters of

foreign workers with similar employment patterns or demographics.

3. Classification Algorithms: Predicting outcomes, such as the

likelihood of foreign workers obtaining work permits based on
qualifications and background.

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1.8 Data Presentation And Analysis

In the given table it is shown that the data of the foreign employment is
rising day by day. It is a table of Ministry of Labor, Employment and
Social Security and Foreign Employment Development. Everyday
millions of Nepali people are forced to leave their country in sorts of
employment and to look after their families. In Nepal, people do not
get job. Even people get job, they are not able to earn or fulfill their
basic.

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When it comes to analyzing foreign employment, there are several key
aspects to consider. Here are some points to help you with your
analysis:

1. Demographics: Analyze the demographic characteristics of foreign

workers, such as their age, gender, education level, and country of
origin. This can provide insights into the composition of the foreign
workforce.

2. Employment sectors: Examine the different sectors where foreign

workers are employed. This can include industries like healthcare,
technology, hospitality, or construction. Analyzing the distribution of
foreign workers across sectors can help identify trends and patterns.
3. Labor market impact: Assess the impact of foreign workers on the
local labor market. This involves examining factors such as job creation,
wage levels, and skill gaps. Analyzing the labor market impact can
provide a comprehensive understanding of the effects of foreign
employment.
4. Economic contribution: Evaluate the economic contribution of
foreign workers to the host country. This can include analyzing their
contributions to GDP, tax revenue, and entrepreneurship. Understanding
the economic impact can help assess the overall benefits of foreign
employment.

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5. Social integration: Explore the level of social integration of foreign
workers within the host country. This can involve analyzing factors such
as language proficiency, cultural assimilation, and social support
systems.

1.8 Summary And Conclusion

SUMMARY
In summary, Nepal's foreign trade has shown a mixed trend
characterized by gradual growth in both imports and exports, with
fluctuations influenced by various factors such as political instability,
natural disasters, and global economic conditions. Efforts to diversify
trade partners beyond traditional routes, including agreements with
countries like China and India, have been notable. Challenges persist,
including the need for improved infrastructure, trade facilitation
measures, and enhanced export competitiveness. Despite these
challenges, there are opportunities for expansion and development
through strategic policies, regional cooperation, and investment in key
areas. Overall, Nepal's foreign trade landscape remains dynamic and
complex, with potential for growth and strengthening its position in the
global market.

Nepal's foreign trade trajectory reflects a mix of challenges and

opportunities. While efforts to diversify trade partners and
improve infrastructure are underway, addressing persistent issues
such as trade facilitation, export competitiveness, and institutional
reforms will be critical for Nepal to fully realize its trade potential
and foster inclusive economic development.

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 Conclusion
In conclusion, Nepal's foreign trade has seen both challenges
and opportunities in recent times. Despite being a landlocked
country with geographical constraints, Nepal has been actively
engaged in trade with its neighboring countries and beyond.
The trend has shown a gradual increase in both imports and
exports, albeit with fluctuations influenced by various factors
such as political instability, natural disasters, and global
economic conditions.
One notable development has been Nepal's efforts to diversify
its trade partners beyond traditional routes. The signing of
trade agreements and the establishment of economic corridors
with countries like China and India have opened up new
avenues for trade. Additionally, initiatives to improve trade
infrastructure, such as the development of ports and roads,
have aimed to facilitate smoother trade operations.
However, challenges persist, including the need for greater
investment in infrastructure, trade facilitation measures, and
the enhancement of export competitiveness. Addressing these
challenges will be crucial for Nepal to fully harness its trade
potential and achieve sustainable economic growth.

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Overall, while Nepal's foreign trade landscape remains dynamic
and complex, there are opportunities for expansion and
development. By implementing strategic policies, fostering
regional cooperation, and investing in key areas, Nepal can
navigate through challenges and capitalize on emerging
opportunities to strengthen its position in the global market

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