First Meeting of the Regional Network of Legal and Technical Experts on Transport Facilitation Status of Nepal (February 10-11, 2014):

Umeshanand MishraProject Director, Postal highway Project

Status of Nepal

Introduction of the Country

NEPAL in briefSituated between China and IndiaCountry where Buddha was born: “LUMBINI” is the holy place”A Himalayan country where 8 of 14 highest peaks on Earth lies (Altitude more than 8000m, including Mt. EVEREST)A mountainous country (only 17% of flat land)147,181 sq km of areaPopulation as per 2011 census:26.62 millions

Introduction of the Country

Development of Highways in Nepal

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Road Network of Nepal, 2013

HighwaysFeeder Roads, km

Local Road Network, km Total, km

Highways Feeder Roads

District Roads Urban Roads

5031 6604 47108 3835 62579

11636 50943 62579

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Type of Road Blacktop Gravel Earthen Total Km/100 sq km

SRN 5574 1888 4173 11636 7.9

Local 1575 14601 34766 50943 34.61

Total 7149 16489 38939 62579 42.52

Network in % 11.4% 26.3% 62.3% 100%

Source: DoR and DoLIDAR, 2013

Cross- Border and Transit Transport by Land

Nepal is surrounded by India in south, east and west and Tibet, the Autonomous region of People's Republic of China in the North and lacks the access of seaport. The absence of seaport deprives the competitive global business. The sea freight is almost same to all countries. However, the extra transit cost, sometimes, is exorbitantly high up to 40% inNepal’s case that inflates the price of both imports and export. But, It has Opportunity to be-Land Linked Country between India and China –Transport Hydro power provider to the region- TradeA regional hub for tourists- Again Transportation facility

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Cross Border Trading Point

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Cross- Border and Transit Transport by Land

Fundamental Transit Policy Issues of Land Locked Countries in South and South West Asia South Asia’s three Landlocked countries - Afghanistan, Bhutan and Nepal - are also least-developed countries (LDCs). Afghanistan depends on the ports of Pakistan and Iran for its overseas freight traffic. Both Nepal and Bhutan solely use Indian ports for their overseas trade: Nepal uses Kolkata port and Haldiya port and Bhutan uses Kolkata port. South Asia is probably the region having poorest intra- regional transport connectivity in the globe.

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Existing Legal basis for Cross- Border and Transit Transport by Road

Multilateral and Bilateral Trading Arrangements Bilateral Trade Agreement with 17 trading partners Nepal – India Transit Treaty, 2006 Trade and Transit Treaty between Nepal and China-Nepal Bangladesh Transit Treaty, 1976 Transit right of LDC related UN conventions 1980, 1991 and 2001,Trade and Transit right as managed in Law of Sea 1958, 1982 WTO, BIMSTEC,SAFTA (Nepal's bilateral Trade Agreement between 17countries and Nepal's accession to the WTO, April, 2004) BIPPA agreement concluded with 10 countries including India Double Taxation Avoidance Agreement (TAA) with India SAARC Agreement on Mutual Administrative Assistance in Customs Matters Schemes for export to Belarus, Canada, EU, Japan, New Zealand, Norway, Russian Federation, Switzerland, Turkey, and the United States 9

Main corridors for cross border Road Transport

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Existing legal basis for Cross border and transit transport by road

Agreed Routes for Mutual Trade India-Nepal: 27 Bilateral trading points (Treaty of Trade) China-Nepal: 3 international and 3 bilateral trade point Transit Route India and Bangladesh Kolkota/Haldia Sea Port for 3rd country trade connecting with 15 Nepal-India Routes Phulbari-Banglabandh Transit to Bangladesh Kodari Lhasa route in operation for trading with China but the road condition and terrain are poor

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Proposed North south connectors

Major Challenges in Cross Border and Transit Transport by Road

Nepalese trade is mostly inclined with India and China; Dependence on transit providing country's; infrastructure, political relations, peace and stability, administrative practices; Restricted choice of ports and routes ; Cumbersome transit processes including procedural controls; Hassles in the from of multiple checking agencies ; Actual documentary requirements higher than those specified in transit treaty ; High insurance cost due to lack of competition ; Trans-shipment; Because the import and export trade is imbalanced, there is significant empty back-haul that creates inefficiency

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Major Challenges in Cross Border and Transit Transport by Road

The Banglabandha port was formally inaugurated in May 2004 but has not been fully functional owing to the absence of a transit agreement for the use of Indian territory as a transportroute for Bangladeshi, Nepalese and Bhutanese trade cargoes. Nepali transport trucks are not allowed entry into Bangladesh and must exchange their cargo at the "zero point" of the Indo-Bangladesh border. •Strikes •High cost •Need to cross different checking and time consuming

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Current Status of Cross-Border Operations for Freight and Passengers by Rail

Jayangar in India to Janakpur 42 km old narrow gauge rail line which basically carries the passenger traffic. The Raxaul of India and Birgunj ICD in Nepal, a stretch of 5.4 km for

goods traffic.

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Railway transit route from Nepal to Kolkata

SAARC Rail Routes to Bangladesh

Current Status of Cross-Border Operations for Freight and Passengers by Rail

Half the third-country imports transit in containers by rail from Kolkata to Birgunj. These goods are high-value goods. The remaining 50% of third-county goods travel to Nepal by road in containers or as break-bulk. Approximately 5% of third-county containers arriving by rail at Raxaul originate from Chittagong. While there is a rail link from Chittagong to Dhaka ICD, it is not possible to transit completely by rail to Nepal (West, though Bangladesh and India) as the Jamuna Bridge (near Saidabad, Bangladesh) cannot support rail freight loading.

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Current Status of Cross-Border Operations for Freight and Passengers by Rail

The defined corridor for bilateral rail movement is between Nepal and India is-

• Single broad gauge line from Birgunj to Muzaffarpur (137km); • Double track between that point and Varanasi (103km); and

thereafter; • Electrified double line to Kolkata or other Indian destination

The distance from Kolkata to Birgunj is 704 km and between Haldia and Birgunj, 832km. The train path is controlled by Indian Railways and the container haulage operation is Controlled by IR. About 250 train movements to Nepal each year. Indian Railways is required by agreement to unload the 80-90 containers on the rake in 8 to 12 hours and this is achieved using modern reach stackers (there are no rail mounted gantry cranes)

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Legal Arrangements for Cross Border Rail Operations

Nepal India Railway Service agreement in May 2004 Need to review in every 5 year The existing railway agreement signed in 2004 allows limited movement of rail Cargo between Birgunj ICD and Kolkata and Haldiya ports of India.

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Major Challenges in Cross-border rail TransportThere are a number of time hindrances to the rail transit of goods that include: • the need for aggregation of goods at the port of departure or the de-stuffing and aggregation of containers at the port of arrival; • the need to fill each train rake before it can depart; and • the need to agree train paths between existing train services. • as the shipping lines only conventionally provide 14 days free time for the use of containers from ship discharge to return to port, the extended transit times can result in significant demurrage charges that add significantly to overall cost. • the consequence of these hindrances is that for cost reasons, or because cargo is time-critical cargo, goods are transferred from the port by road. Lack of timely amendment of Rail treaty with India Need to extend railway link in Kakrabitta, Biratnagar, Nepalganj and Bhairawa Customs Infrastructure development for railway connectivity

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Acts, Policies and Major Initiatives Taken

Custom Acts and Regulations amended and new provisions are incorporated in line with Revised Kyoto Convention and WTO Valuation system Trade Policy 2009 and Industrial Policy 2010 Trade and Transport Facilitation Committee under Commerce Secretary to steer trade facilitation Trade Facilitation committee formed in Department of Customs under chairmanship of DG. Customs opening days and hours harmonized with the bordering countries’ India and China’s opening days and hours Tariff rates streamlined as per WTO commitments 100 percent performance based incentives to the customs employees Emphasis on good moral conduct and transparency on operation

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Acts, Policies and Major Initiatives Taken

Trade Facilitation by Customs Reform & Modernization Strategy CRM Action Plan 2003-2006 (Completed) CRM Action Plan 2006-2009 (Completed) CRM Action Plan 2009-2013 (Completed) CRM Action Plan 2013-2017 ( Proposed/ Ongoing )

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Key Challenges of Trade Facilitation in Nepal Concluding A framework agreement in south Asia which would include elements such as; ㎀Harmonization of rules, procedures and documents ㎀Mutual recognition of certificates, licenses and polices, ㎀Effective dispute settlement and risk management systems, ㎀Special rules for certain products , Infrastructure up gradation, particularly in LDCs Facilitating transportation of goods in transit for intra – regional as well as extra-regional trade in keeping with the spirit of Article V of the General Agreement on Tarrffs and Trade (GATT) relating to "Freedom of Transit" Supporting the implementation of the SAFTA and deepening regional economic integration

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Key Challenges of Trade Facilitation in Nepal

Provision of multimodal transport facility Adoption of the TIR (Transports International Routers) system or a similar regionally based equivalent customs transit system.Investment in infrastructure hardware as well as software Quality of roads and railways infrastructure and service Gauge compatibility for railways Border facilities including customs, infrastructure Use of ICT in trade administration) Issues on third country passage via India Quality control/quarantine related issue Illegal trade regulation

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Key Challenges of Trade Facilitation in Nepal

Working modalities Weakly harmonized working hours between Bilateral trade with India and Bangladesh More steps, Documents requirements and time to clear Kolkata Bound import and export cargo Lack of cooperation and integrated approach among border agencies Excessive physical intervention at the border points

Others Domestic Supply side Constraints (Inadequate infrastructure, transportation, meeting the certification requirement) Barring of Nepalese transporters heading from Kolkata Lack of Comprehensive Transport Agreement

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Way Forward in Trade Facilitation in Future Days

Accession to Revised Kyoto Convention Implementation of E-Customs Master Plan Process and Procedures simplification for E-Customs Operation of additional four Integrated Customs Posts and one ICDCross Border Harmonization and Exchange Web Based System Development for Customs

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