The EU would like to highlight some of the positive developments that have taken place during this period under review.
The EU commends Nepal's strong commitment to the multilateral trading system and, as reflected by its accession to the WTO, its support for a rules-based system. We also commend its strong efforts to graduate from Least Developed Country (LDC) status by 2022.
Since its last TPR in 2012, Nepal has continued to improve its customs procedures by implementing a series of Customs Reform and Modernization Strategies and Action Plans, and through an E-customs Master Plan which is intended to create a web-based paperless system of customs clearance.
Nepal has also improved the business climate and made foreign direct investment inflows more attractive, through its Foreign Investment Policy in 2014, and by adopting new legislation such as the Industrial Enterprise Act in 2016, and the Labour Act in 2017.
The EU welcomes Nepal's ratification of the Trade Facilitation Agreement in 2017 and the notification of its Category A, B and C commitments under this Agreement. The EU also commends Nepal's ratification of the Protocol amending the TRIPS agreement in 2016. We call on Nepal to consider joining the initiatives on electronic commerce, investment facilitation and MSMEs as well as the declaration on women and trade.
Even though Nepal was hit very hard by the earthquakes in 2015, economic growth has averaged 4.4% per year since 2012. We notice that trade (exports and imports of goods and services) accounted for 52% of GDP in 2017 (compared to about 40% in 2012). Nepal is among South Asia's most competitive economies (the third after India and Bhutan). The service sector has accounted for nearly 60% of GDP in 2017-2018, with the tourist sector being of key importance to Nepal's social and economic development.
The EU has important relations with Nepal. The EU is Nepal's third trading partner, accounting for about 4% of Nepal's total trade in goods. Being a LDC, Nepal benefits from duty-free and quota-free access to the EU market for all products (except arms and ammunition) under the "Everything But Arms (EBA)" arrangement in the context of the EU's unilateral Generalized Scheme of Preferences (GSP).
Nepal and the EU, together with its Member States, are also important partners in development cooperation. In line with Nepal's development plan, cooperation focuses on support to a sustainable rural development (including nutrition), education and strengthening of democracy and decentralisation. Our multi-annual indicative programme for Nepal allocates € 360 million in 2014-2020.
The EU would also like to raise a few challenges, some related to the questions we addressed earlier. We appreciate Nepal using the alternative timelines that has allowed us to review the replies in advance of the meeting.
First, Nepal is one of the region's poorest countries, highly dependent on remittances. The EU supports Nepal's efforts in reducing poverty and improving overall living standards. Its National Development Plan aims to achieve socio-economic transformation by reducing poverty through employment-orientated economic growth, and also recognizes trade as an important factor towards achieving the objective of long-term inclusive and sustainable growth. This is also emphasized in the National Trade Integration Strategy (NTIS) 2016.
Second, we note that Nepal's export structure remains heavily concentrated on textiles, clothing and agricultural products. We encourage Nepal to continue efforts to diversify its export basket and to modernise its traditional agrarian economy.
Finally, in the context of notification obligations to the WTO, the EU appreciates Nepal's efforts to improve transparency and encourages Nepal to notify the outstanding notifications.
On behalf of the EU, I look forward to a constructive exchange of views during this Trade Policy Review and wish Nepal's delegation the best of success.