Financial Crime World

Nepal’s Compliance Concerns: Cardamom Trade Hits Roadblocks Over Export Requirements

A Snag in Nepal’s Cardamom Exports

Nepal’s cardamom exports have hit a roadblock due to costly and time-consuming testing requirements before shipping goods abroad. The country’s lack of proper testing labs has led to delays and increased costs for traders, who must send their products to neighboring India for certification.

The Challenges Faced by Traders

  • According to Sundar Dahal, Managing Director of Starlight Express, driving 600km to get an export certificate is not uncommon.
  • “We don’t have a proper testing lab in Nepal, so we have to drive across the border to get our products tested,” he said.
  • The process comes at a cost, with traders reporting compliance verifications outside of Nepal can cost up to US$1,700 per shipment, representing in some cases 50 percent of its value.

Unpredictable Export Processing Times and Lack of Information

  • Traders cite unpredictable export processing times as another challenge.
  • The lack of information on requirements for new markets adds to the complexity.
  • Insufficient government capacities also hinder trade.

Digitalization of Trade Processes Lacking

  • The lack of digitalization leads to burdensome and duplicate paper-based processes.
  • Enhancing the conditions for trade is critical for Nepal’s economic development, as agriculture comprises around 35 percent of total exports.

Addressing the Issues

  • Nepal’s sanitary and phytosanitary (SPS) agencies have been working together to strike a balance between providing a conducive environment for traders and protecting against pests, diseases, and contaminants.
  • The World Bank Group partnered with the Food and Agriculture Organization and other experts to undertake an assessment of the agencies’ alignment with international standards and best practices.

Recommendations and Reforms

  • Assessments identified gaps in human and financial resources, capacities, and infrastructure.
  • A clear set of recommendations was developed, outlining three key areas of focus:
    • Improving resource allocation
    • Strengthening infrastructure
    • Assisting government agencies in skills and knowledge improvements
  • The plan triggers a series of reforms, including the modernization of SPS operations, and is financed under a World Bank Group development loan of US$450 million.

A Brighter Future for Nepal’s Traders

  • Addressing these gaps will better position traders to meet SPS standards, leading to increased market access and reduced trade costs.
  • “Strengthening infrastructure, streamlining SPS processes, automating requirements, and making them more transparent will help to bring Nepalese assets – like cardamom – to more countries worldwide,” said Dahal.

Funding Support

  • A grant from the South Asia Regional Trade Facilitation Program supported this work with funding from Australia’s Department of Foreign Affairs and Trade.