KEY RESULTS

• LDC graduation progress | Support has helped Nepal advance its ambition to graduate from LDC status.
• Increased trade integration | The Enhanced Integrated Framework (EIF) helped create Nepal’s National Implementation Unit (NIU), which played a crucial role in the coordination and implementation of the country’s National Trade Integration Strategy (NTIS).
• Tea sector growth | An EIF project supported the establishment of the collective "Nepal Tea: Quality From The Himalayas" trademark, the growth of orthodox tea production and access to international markets. 
• Targeted capacity-building | EIF capacity-building initiatives scaled up worker skills and productivity in the medicinal and aromatic plants sector. 
• Export-supported economic and social development | EIF support to the increased capacity of Nepal’s pashmina sector has improved the economic and social development in targeted communities.
• Increased security for the ginger farming sector | A project targeting Nepal’s ginger sector – supported by the EIF, the Government of Nepal and other partners – led to higher incomes and lower unemployment in farming communities.  

Nestled into the slopes of the southern Himalayas between China and India, Nepal is a landlocked country with an economy focused largely on agriculture, tourism and manufacturing.

Nepal’s economy has struggled with a significant trade imbalance, whereby its exports represent only a small fraction of its imports. The barriers to Nepal’s trade are mainly due to supply-side constraints, such as low investment, inadequate infrastructure and trade facilitation bottlenecks. In recent years, however, the Government of Nepal has leveraged support to undertake initiatives to promote exports to achieve sustainable economic growth, poverty reduction and development. 

Nepal’s first Diagnostic Trade Integration Strategy (DTIS) in 2003 identified a range of products with comparative and competitive advantages; these included, for example, several labour-intensive manufacturing and agricultural products.  

This was followed by an update in 2010, the Nepal Trade Integration Strategy (NTIS 2010), which outlined actionable priorities for export sector development. Based on these priorities, projects were implemented to strengthen value chains for ginger, medicinal and aromatic plants, and Chyangra Pashmina (CP), with support from the EIF. The NTIS 2016 further emphasized product and value chain development, including in the tea sector, leading to the implementation of a dedicated tea project to strengthen the capacity of this sector.

To ensure continuity and ownership, all activities implemented by the EIF were integrated into the government’s organizational structure.

Building institutional capacity 

Based on initial support from the EIF, the Government created an NIU – with core staff from the Multilateral Trade and Trade Cooperation Division – which was embedded in the Ministry of Industry, Commerce and Supplies. NIU staff prioritize the involvement of other technical departments, such as Department of Industry and the Ministry of Agriculture and Livestock Development, in the implementation of trade-related projects. This approach helps to embed results, harmonize interventions and create systemic change more broadly.

The NIU supports and contributes to the development of Nepal’s trade sector, aiming to promote sustainable and pro-poor growth. It also encourages trade mainstreaming at the provincial level. At the same time, the NIU has coordinated and facilitated the implementation of trade-related technical assistance projects supported by United States Agency for International Development, the European Union and other development partners.  

Supporting Nepal’s LDC graduation

Nepal first met the criteria for least developed country (LDC) graduation in 2015. However, in its 2018 triennial review, the Committee for Development Policy (CDP) recommended deferring the graduation at the request of the Government of Nepal, citing the economic setbacks caused by the 2015 earthquake and other disasters. The CDP subsequently recommended Nepal for graduation in 2021, and Nepal is now scheduled to graduate from LDC status in 2026. 

The EIF has supported this process through transition strategy consultations with the private sector. The NIU was involved in formulation of a trade-centric graduation strategy and liaised with two major journalist associations – the Society of Economic Journalists and the Nepal Association of Financial Journalist – to raise awareness and provide information about the impacts of LDC graduation, the WTO 13th Ministerial Conference, including what Nepal can expect going forward. Additionally, the outcome of these collaborations also led to formulation of Nepal's MC13 Position Paper.

Enhancing export capacity in Nepal’s tea sector

In 2021, Nepali tea exports were worth around USD 24 million, making it the 30th largest exporter of tea in the world. Although small on a global scale, the tea processing industry was identified in Nepal’s NTIS as a potential growth sector and an important channel for poverty alleviation. Nepal has vast areas suitable for tea plantations, and global demand for niche teas – such as orthodox tea (which is processed using traditional methods) – has been expanding. 

In 2016, the NTIS recommended improving Nepali tea quality, with the goal of increasing export revenues and leveraging opportunities in international markets. The NIU was integrated into the Ministry of Industry, Commerce and Supplies to implement a project (NISTE project) aimed at increasing Nepal’s sustainable tea exports, improving tea producers’ incomes, and fostering entrepreneurship in the sector. The project ran from November 2020 to November 2023 and, despite an overall decrease in export quantity due to COVID-19, helped raise the export price for organic orthodox Nepali tea from USD 8 per kilogram to USD 9.5 per kilogram.

Notably, Nepal's orthodox tea market has been expanding, driven by increasing demand from its northern neighbor, China. This was evident during the Fourth International Tea Festival in 2024, where a sizeable number of Chinese tea buyers attended the event. The festival, organized as a key activity under the NISTE project as part of its marketing initiatives, allowed buyers to witness the tea production cycle, interact with farmers and processors, and visit tea estates in the Ilam district. Gorkha Tea Estate, a major beneficiary of the project, was able to export 6,362 kilograms of tea formally to Spring Tea Limited of China in the last quarter of 2024. Nepali tea entrepreneurs believe this is a stepping stone to further expanding their market in China.

The project addressed quality concerns, improved Nepali tea’s compliance with international standards and facilitated access to international markets. This was achieved by establishing a technology-based traceability system, allowing products to be tracked along the entire supply chain. Additionally, tea stakeholders were trained in organic certification practices with the goal of increasing the production of high-quality organic tea. 

The issue of marketing, which had hindered the sector’s visibility in international markets, was also addressed through this project. Tailored training activities exposed tea associations to the latest branding and marketing techniques. The EIF also helped generate a collective trademark for the branded tea: “Nepal Tea: Quality from the Himalayas”, which was crucial in raising the sector’s export profile. 

One success story linked to the EIF support to the tea sector project was the fact that Siddha Devi Tea Estate, one of the project beneficiaries, was awarded the Grand Champion title at the 2024 World Tea Expo.

Strengthening the medicinal and aromatic plants sector

Owing to its diverse topography and climates – as well as its unique geographic location in the Himalayas – Nepal is home to some 11,000 species of plants, nearly 820 of which are medicinal. As such, the Government of Nepal identified medicinal and aromatic plants (MAPs) as an important sector with potential for export and revenue earnings, employment generation and poverty alleviation.

In order to capitalize on these opportunities, the EIF worked closely with the government to address some significant barriers in the medicinal and aromatic plants value chain. The support focused on improving market access, especially to Europe; strengthening sustainable harvesting and processing; and showcasing the uniqueness of the products. Nepal’s medicinal and aromatic plants are organic and distinctive, with most of them endemic to the Himalayan region. Supported by the EIF and implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit, the German development agency, an organic certification scheme was developed and institutionalized. These efforts allowed Nepal to enter the European market. 

The positive outcomes from the EIF’s support can be seen in many ways. The value and volume of essential oil exports increased significantly during the period of implementation between January 2014 and March 2019. More than 550 farmers in the mentha sector were supported, which led to the production of nearly 7,000 kilograms of oil and sales of 11,850 Nepali rupees (NPR) per kilogram. Farmers cultivating medicinal and aromatic plants saw their incomes increase annually by 23.5% between 2014 and 2018, improving their livelihoods and economic well-being. The project also increased annual membership of traders’ associations, directly reaching almost 4,300 individual households, including women and other disadvantaged groups.

Diversifying the Chyangra Pashmina sector

From 2013 to 2017, the NIU cooperated with the International Trade Centre to implement a Pashmina Enhancement and Trade Support project, with the aim of strengthening the institutional capacity and competitiveness of the pashmina sector. Chyangra Pashmina is the highest-grade, finest cashmere in the world, featuring the rare fibres of the Chyangra mountain goats of the Himalayas. With its traditional manufacturing methods, quality and designs, Chyangra Pashmina has a unique selling point and niche market.

With support from the EIF through the project, the diversification of pashmina products resulted in an increase in business revenues by almost 200% – to more than USD 5 million in 2016. Additionally, around 670 new jobs were created in the Chyangra Pashmina sector. The project contributed to strengthening the institutional skills of the Nepal Pashmina Industries Association (NPIA), enabling the organization to enhance and sustain the quality and competitiveness of the industry. Ensuring higher standards and added value was key to establishing the Nepalese Chyangra Pashmina label as a niche product, attracting new buyers and better prices.

Through the support provided by the project, the capacities of sector stakeholders – including NPIA staff – were significantly improved to ensure successful project implementation and further development.

Enhancing standards to boost the Nepali ginger sector 

Ginger is a major cash crop for Nepalese smallholder farmers, as identified by the DTIS. Already, Nepal is the fourth-largest producer of ginger in the world. However, while its quality is regarded as high on international markets, Nepal has missed out on a number of lucrative export opportunities in the sector. Barriers to realizing its potential include limited knowledge of, and ability to comply with, export standards, particularly sanitary and phytosanitary (SPS) requirements. However, these challenges could be overcome by enhancing local facilities that allow for improved washing and post-harvest processing, as well as the application of relevant SPS measures.

While unwashed ginger cannot be exported due to lack of compliance with SPS standards, the mountain region of Eastern Nepal, where ginger is produced, does not have sufficient water to make a local facility feasible. To address this challenge, the EIF and the WTO Standards and Trade Development Facility, in collaboration with the UN Food and Agriculture Organization and the Government of Nepal, supported a ginger project that saw the construction of a centralized processing and washing system in the plain at Duwaghadi, Jhapa district. This facility was the first of its kind, with the capacity to wash 18 metric tons of export-quality ginger per hour. The project achieved sustainability by handing over the facility to the National Ginger Producers and Traders Association (NGPTA) and by providing intensive training for farmers in farmer field schools in quality ginger production. Through the farmer field school approach, 59 lead farmers were initially trained to mentor others, ultimately reaching nearly 2,000 farmers—60% of them women—and significantly reducing post-harvest losses across eastern Nepal.

Making consistent progress

In the time that the EIF has been working in Nepal, the Government has shown determination and commitment in addressing the supply-side constraints of its trade sectors. In particular, it has achieved tangible results in skills development and improved capacity for its tea, medicinal and aromatic plants, ginger and Chyangra Pashmina value chains, increasing their competitiveness in the global market system. With the support of the EIF, Nepal has successfully mainstreamed trade, developed human resources of both private and public sectors, built capacity and competitiveness in these four key areas. While some challenges related to creating an enabling environment for entrepreneurship and foreign investment remain, current levels of dedication and support are promising for future success.