Submitted By : Megha Sharma

Merina Maharjan
Shirish khanal
Bidhan Chandra Lohani
Aakash parajuli
Product that Nepal can Specialize On:
Pashmina
Jute
Alaichi
Flavoured water
Tourism
Handicraft
Marpha
Ayurvedic product
Apple
Sculpture
Knotted Carpet
Textile
Leather product
Threads
Paper products

Absolute Cost Advantage theory:

Sculpture:

Nepal has got absolute advantage in production of statues (wooden or metal). In the past Nepalese
Sculpture had tremendous influence on the art of china and Tibet, as both countries import art and
artists from Nepal to adorn their temple and monasteries. Nepal have the ability to produce the
greater quantity of Sculpture than others with the same amount of resources. Nepal has got ability
to produce more of it not just because of resources it has but with that of labor it has got. They have
unique talent in making of such sculptors and labor force other than that of Nepal do not necessarily
posses that talent.

Comparative Advantage:
Nepalese Carpets:

Nepalese carpets are the most exported item by Nepal. The Nepalese- Tibetan carpets contain a very
high degree of hand processing and qualities ranging from 60-150 knots per square inch. Regularity
safe guards are in place to ensure that only highest quality fleece wool is imported for use in these
carpets. The traditional design of the Nepalese-Tibetan carpet are basically influenced by Buddhism
but in recent years the Nepalese manufacturers have introduced modern design and colors in line
with the present day market tastes. The traditional size has been replaced by a wide range of sizes
from 0.25Sq.m. to 56m2 in shapes such as round, octagon and customs shapes. The desired designs,
styles and shades are the creation of local designers & engineers with regular feedback from the
market. Knotted carpets are the 843rd most traded carpets around the world an 1159th most
complex product according to the Product Complexity Index. At present, 95 percent of the
production of carpet is concentrated in the Kathmandu valley with the remaining 5 percent is
spreading over a number of other districts of the country. Out of total exports made by Nepal
approximately 8.5% of those are covered by knotted carpets. Nepal exported $78.3 worth of carpet
in 2013-2014.

Factor Proportion Theory:

Tourism:

Tourism is the largest industry in Nepal, and the largest Source of foreign exchange and revenue.
Possessing 8 of the 10 highest mountains in the world, Nepal is a hotspot destination for
mountaineers, rock climbers and people seeking adventures. Nepal have the landscape that no
other country has got. Many tourist from around the world come to visit Nepal for trekking and
Rock Climbing. Destination such as Annapurna and Everest base camp, the trek of Ghorepani-
Poonhill , the beautiful view at rara lake inspire every people to come to visit Nepal. Nepal is famous
for high mountains, fast flowing rivers, green forests, tranquil lakes and old temples. These facts lure
everyone to visit Nepal. Nepal is a supposed to be a suitable destination for nature
lovers, trekkers and mountaineers. Fast flowing meandering rivers are quite suitable for rafting.
Nepalese people are hospitable to the guests. They consider their guests as god. So, Nepal has lot of
prospects of tourism. And that prospect is only because of the Land structure it has got.

IPLC Theory:

Leather Products:

A theory explaining why a product that begins as a nations export eventually becomes import.
Leather used to be one of the major exportable items in the basket of the Nepalese exportable
products. Most of the Nepalese leather goods used to be made of leather processed within the
country. However, good quality finished hides for shoes and finished goat leather for leather
garments are being imported for the past few decades. Nepal use to manufacture and export
varieties of leather goods like jackets, handbags, belts, purses, shoes and boots, gloves, wallets,
vests, skirts, trousers, travel bags, camera bags, prone, folders, picture frames, key holders etc, of
both traditional and modern design in various size and colour. Design and making were tailored to
the buyers' requirements. As many as 65 % and 15% of the total raw materials needed for producing
the leather shoes and other leather goods were respectively supplied from within the country. But
slowly and steadily production of the leather products declined and now it is becoming one of the
importable items in Nepal. Most of jackets, bags and shoes made of leather seems to be of foreign
brands. And people preference of foreign brands implies the declining of domestic leather in Nepal.

Theory of National advantage :

Tea:

Porter studied 100 industries in 10 nation and postulated a determinants of competitive advantage
of a nation based on four major attributes; Factor endowment, Demand Conditions, Related and
supporting industries, Firm strategy, structure and rivalry. And success occur where those 4
attributes exist, greater the attribute higher the chances of success.

Factor Endowment:

Cultivated in hilly areas and in high altitudes is conducive for the highest quality . Nepal host most of
the orthodox crops at altitudes approximating 30007000 feet above sea level. Nepal has six
districts in which Orthodox is produced; Ilam, Dhankuta, Kaski, Terhathum, Sindhulpalchok, and
Panchthar. Among these districts there are a small number of medium-to-large scale estates as well
as a large number of small holder farmers. Once the plant reaches maturity, its leaves can be
harvested around four to five times a year, for many years. The different harvests of are called
flushes. In Nepal there are four separate flushes in a growing season; first flush, second flush,
monsoon flush, and autumn flush.

Demand Conditions:

Over 16ooo tons of produced annually in the country. nearly 95% of it is exported, and nearly 12%
of the are produced through orthodox procedures. Per capita consumption of is 2057 kg annually .
CTC black is most consumed domestically . only 5% of the consumed is orthodox and Orthodox
is considered as premium over the CTC in Nepal. 26 companies produce orthodox . Since, only an
estimated 5% of these are consumed domestically, most of these companies sell the processed to
Indian or other foreign importers. Hence, there exist only a few domestic brands of green . And
people still prefer Nepalese Brand of Tea against that of Foreign

Related and supporting industries:

Porter also argues that a set of strong related and supporting industries is important to the
competitiveness of firms. This includes suppliers and related industries. This usually occurs at a
regional level as opposed to a national level. And Tourism can be the related and supporting
industry of the Tea industry and example of Ilam can be taken into consideration. Many people visit
Ilam as a tourist ,be that Internal or External, to enjoy the beautiful scenery of the Chiya Bagan .

Firms strategy and Rivalry:

The market in Nepal is competitive with established brands like Muna, Tokla etc. from the home
country while Red Label, Brook Bond, Taj Mahal, Dilmaha etc. from neighboring countries
fighting for market share. However, there are very few branded competitor in the orthodox
category. This type of is not usually sold in packaged manner so the consumers seem to be
indifferent about various brands as well as various types of available in the market. Tea industry can
take high advantage of the current situation with its premium quality packaged . It needs to aware
consumers about the various varieties of s like CTC, Orthodox, Green , Oolong etc. and can target
the domestic consumers alongside making them conscious.

Product to Specialize On:

Home to eight of the highest mountains in the world, the Himalayan nation has been a paradise for
adventure seekers offering them ultimate challenges. The tourism sector is a key contributor to
Nepal's economic growth. Despite its political instability and poor infrastructure, the country
attracted nearly 600,000 foreign tourists in 2012, a 10% cent increase on the previous year.The
industry provides employment to more than 750,000 people in a country where the unemployment
rate is more than 45%.
Tourism Industry for Nepal can be made even more better . Current Nepalese industry of tourism is
good but not up to the level it should be of. It can be taken even ahead. And to help Nepal to
specialize on tourism industry both the private as well as public sector both can help together. And
nowadays private institutions has started supplying trained man power for tourism sector. These
institutions specialized themselves on not only for traditional requirement for tourism but for also
for trekking, rock climbing and mountaineering to the people involved in the industry. Products and
services need to be significantly improved if Nepal is to regain the confidence of incoming tourists
and attract more visitors. Improving rural and urban infrastructure, training personnel and
developing safe trekking systems would help improve quality and tourist experience. So, By
specializing even more on tourism industry Nepal can gain even more than that of before.

Recommendation for Commercial Policy of Nepal :

Nepal should create a conducive atmosphere for making trade competitive at
international level:
The private sector should be facilitated to actively engage in the conduct of trade and the
government should play the role of a guide, guardian, regulator and motivator.
Transaction costs should be reduced by facilitating exports and imports through procedural
simplification, facilitation and institutional strengthening
Reform measures should be introduced with the development of policy, institutional and
physical infrastructures relating to trade in goods and services.
Market access of Nepalese products should be enhanced through protection of intellectual
property rights.
Goods that are of comparative advantage, and based on skills, means and resources
available in the country should be identified and selected, and promotion of trade in such
goods should be supported.

Reducing trade deficit through export promotion.

Procedures of import should be simplified and incentives should be provided for the import
of raw materials and industrial machinery required by the export oriented industries.
Market access opportunities should be expanded for Nepalese products through utilization
of windows available under the bilateral, regional and multilateral trade agreements.
Special economic zones should be established and expanded for export promotion with a
view to attracting domestic and foreign investments.
Increasing income and employment opportunities.
The trade development should be made inclusive, and employment opportunities to
marginalized groups and deprived communities should be enhanced by developing the
employment oriented skills and entrepreneurship in the commerce sector.
Emphasis should be given on the development and promotion of special thrust areas and
industrial clusters with a view to expanding market access to exportable products based on
traditional skills, art and craftsmanship.
Emphasis should be given to increase income and employment opportunities through
promotion of trade in services.

Establishing interrelationship between domestic and foreign trade

Conducive environment will be created for allowing partial consumption within the country
of goods or services produced by export oriented industries.
The goods or services produced for domestic consumption within the country will be
encouraged for exports.