Saturday, March 15, 2014

In-depth analysis of Nepal’s export competitiveness

I. Introduction

Despite being a member of multilateral and regional trade blocs, and having entered into bilateral free trade agreement with India, Nepal’s export performance has remained weak. Nepal has been unable to fully utilize the market access and tariff concessions offered by trading partners, primarily due to crippling supply-side constraints. These have become strong and persistent constraints to export competitiveness. As a land-locked country and with its currency pegged to the Indian rupee, Nepal’s trade concentration (and deficit) with India is notably high. Over the years, the composition of its export basket has hardly changed. Given its strategic location between India and the People’s Republic of China (PRC), and the market access concessions received so far, there exists a huge opportunity to not only reduce trade deficit by increasing exports and substituting imports, but also to stimulate economic activities and create jobs by promoting export-oriented industries.

II. Export Performance and Structure

Nepal’s export performance has been dismal, with the export growth lagging far behind import growth and its share in GDP shrinking. While merchandise exports grew by an average of 0.7%, merchandise imports grew by 13.6% over FY2009-FY2013.[1] Exports reached as high as 13.1% of GDP in FY2000. Since then, it has declined consistently, reaching just 4.5% of GDP in FY2013 (Figure 1). The export basket is dominated by light manufactured and agriculture goods (66% and 23.5%, respectively, of total exports in FY2013). Export of manufactured goods also peaked in FY2000 (9.8% of GDP). It has declined since then, bringing down total exports. Export of manufactured goods was a mere 3% of GDP in FY2013. Nepal exported US$633 million of manufactured products in FY2011. The main manufacturing exports are textiles and fabrics, iron and steel, readymade garments, and non-ferrous metals (Figure 2). Exports to India account for about 60% of Nepal’s total export (Figure 3).

Figure 1: Evolution of exports, FY1976-FY2013

Source: Nepal Rastra Bank

Figure 2: Composition of export in 2011 (US$907.6 million)
 
Source: UN COMTRADE

 Figure 3: Direction of manufacture exports in 2011

Source: UN COMTRADE

The degree of production specialization is declining.  While the level of overall specialization has been low for a long time, a particularly worrisome aspect is the rapid decline of specialization in producing labor-intensive and resource-intensive manufactured goods, which was positive up until FY2007 (Figure 4). Furthermore, Nepal’s existing export capabilities are not advanced as the export basket is dominated by low-value added agriculture and manufactured products. Assets and capabilities (embedded knowledge) required to produce a particular good are normally imperfect substitutes for producing another good of similar nature (differentiated in some aspects only). Hence, the probability that Nepal produces a new export item is closely related to the closeness (or proximity) of that product with another product it is already producing.[2] In this sense, given that Nepal’s installed capabilities are concentrated in the production of low-value added manufactured and agriculture products, the potential comparative advantage in the production and export of new products is also linked to the existing capabilities. With the existing set of infrastructures and other pre-requisites for export competitiveness, the new export products will likely be somewhat similar, in terms of value addition and production capabilities, to the existing ones.[3] There is hardly any substantive change in the composition of the export basket and market diversification (Figure 5).

Figure 4: Specialization index

Source: United Nations Conference on Trade and Development (UNCTAD)

Note: The specialization index compares the net flow of goods (exports minus imports) to the total flow of goods (exports plus imports). The index ranges from -1 to 1, with positive value indicating that an economy has net exports (implying that the country also specializes in the production of that product). Negative value indicates that the country imports more than it exports (resulting in net consumption). This measure of specialization, which can be computed at each product level, normalizes trade balance and enables comparison across countries and product groups by removing biases arising from the size of the economy.

Figure 5: Composition of export basket in 2003 and 2010


Source: The Growth Lab, Center for International Development, Harvard University; http://www.hks.harvard.edu/centers/cid/programs/growth-lab
Note: The charts are called “Tree maps”. The total area represents total exports of Nepal in a given year. The smaller rectangular areas represent the share of each product in total export. The exported products are grouped according to the broader commodity group they belong to (SITC rev.2 code) and are colored accordingly. For instance, red color shows the group of manufacturing goods. The percentage shows the share of trade represented by that good.

A jump from the existing basic production capability (low-value added manufactured and agriculture products) to a more complex production capability (high-value added manufactured and agriculture products, electronics, and equipment)will require greater provision of critical infrastructures, technology transfer and adoption, competitive environment and innovation, enhancement of skills, supportive regulatory and institutional frameworks, and overall macroeconomic stability. These will also contribute to a meaningful structural transformation that is characterized by a high and inclusive growth together with an equitable rise in per capita income.

III. Treaties and Policies

Nepal is the first Least Developed Country (LDC) to become a member of the World Trade Organization (WTO) (on 23 April 2004) through a full working party process. Its membership was approved at the Cancun Ministerial Conference in September 2003. Nepal is also a member of two regional trade agreements (RTAs), namely the Agreement on South Asian Free Trade Area (SAFTA) and the Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation (BIMSTEC) Free Trade Agreement (FTA).[4] Similarly, Nepal has signed a FTA, which is reviewed and renewed every seven years, with India.[5] Nepal’s exports are also getting preferential access under Generalized System of Preferences (GSP) to developed countries’ markets. Furthermore, the European Union has offered duty-free, quota-free access to all export items under its ‘Everything but Arms’ initiative. Regarding trade promotion and investment, Nepal signed the Trade and Investment Framework Agreement with the United States in 2011, and bilateral investment protection and promotion agreements with France, Germany, the United Kingdom, Mauritius, Finland, and India.

In addition to these treaties, Nepal has initiated a number export promotion programs and policies. Nepal’s medium and long term plans and policies highlight the need to boost exports by enhancing value addition, mainstreaming trade, and increasing employment in trade-related sectors. The approach paper for the new Three-Year Plan (FY2014-FY2016) sets targets of NRs100 billion worth of exports by FY2016, NRs1 billion of export of each product listed in the Nepal Trade Integration Strategy (NTIS) 2010, and reduction of the trade deficit to 20% of GDP (from the existing 27% of GDP). The government also rolled out an updated trade policy in 2009 with an objective to reduce the trade deficit by promoting exports, and to boost income and employment opportunities in trade related activities.[6] Consistent with the main objectives of Trade Policy 2009 and to formulate an export-led inclusive growth strategy, the government adopted the Nepal Trade Integration Strategy (NTIS) 2010. It identified 19 key commodities and services[7] with ‘export potential’, the major export destinations for them, and product-specific promotion strategies.

The Industrial Policy 2010[8] emphasizes high-value added production, employment generation, promotion of domestic industries, and facilitation of forward and backward linkages in the industrial sector. Its specifies the provision of additional facilities and incentives such as customs and excise duty refund on imported raw materials and intermediate goods if they are used in the production of export items. It also aims to promote Special Economic Zones (SEZs) and institute a ‘one-window’ policy for all industrial activities.

Given the export performance so far, Nepal has not been able to fully utilize the benefits that come with being a member of the multilateral and regional trading blocs, and the market access concessions offered by the developed countries. Furthermore, the trade and investment promotion policies are not effectively implemented to boost exports. Both external and internal factors have contributed to this, but the latter one seems to be more crippling than the former.

IV. Crippling Constraints

External constraints include non-tariff barriers (NTBs) such as rules of origin, and technical, sanitary, and phytosanitary standards related barriers. Even if tariff barriers are coming down and almost 97% of export items are accorded duty free, quota-free access to the developed countries’ markets, the NTBs are somewhat negating the potential gains by increasing fixed costs, thus eroding cost competitiveness. Nepal faces sanitary and phyto-sanitary barriers to market entry in the OECD countries, India, and PRC.[9] Similarly, technical barriers and hassles at customs point are more prevalent in the region, including PRC. Government support in the form of subsidies to key sectors such as agriculture in OECD countries and India has reduced relative competitiveness of Nepal’s agricultural exports.

Internal constraints are more crippling than external constraints as they negatively impact production capacity of domestic firms and erode cost competitiveness of export items. Market access concessions (exogenous factor) alone will not promote Nepal’s exports. A key to boosting Nepal’s exports is to enhance its production and supply capacity, which currently continues to fall short of demand. In FY2013, the average capacity utilization of industries was just 58% (Figure 6).The major factors that affect supply capacity and erode export cost competitiveness are: (i) lack of adequate and quality infrastructure, (ii) political instability and strikes, (iii) recurring labor disputes, (iv) lack of skilled human resource, (v) deficient research and development investment and innovation in the private sector, and (vi) policy inconsistencies and implementation paralysis.

Figure 6: Capacity utilization of industries
Source: Economic Activities Report (FY2012 and FY2013), Nepal Rastra Bank
Note: Study areas were Kathmandu, Biratnagar, Janakpur, Birgunj, Pokhara, Siddarthanagar, Nepalgunj and Dhangadi

Lack of adequate and quality infrastructure: The inadequate supply of electricity has severely constrained both production and potential comparative advantages of Nepal’s exports. Firms are not able to operate manufacturing plants and machines at full capacity due to the shortage of electricity. They are compelled to depend on generators that use petroleum fuel to power machines, increasing cost of production and eroding cost competitiveness of goods. According to the Enterprise Survey 2013, the percentage of firms owning or sharing a generator jumped to 50.5% in 2013 from 15.8% in 2009. Furthermore, generators met, on an average, 34% of electricity demand. [10] About 69% of firms identified electricity as a major constraint in 2013.[11]

Similarly, the inadequacy of existing transport infrastructure and logistical hassles has also increased production costs and lowered export competitiveness. The major trade routes need upgrading as it is chocking the flow of traffic and increasing the cost of transportation. About one-third of the manufacturing firms identified bad transport facility as a major constraint in 2013. Furthermore, the lack of adequate facilities for warehousing, handling equipment, scanning machines, testing laboratories, and basic information and communication technology (such as harmonized automated customs management systems) have restrained trade flows. 13.  Nepal consistently stands out as a country with one of the poorest logistical and enabling trade infrastructures in the world. In fact, Nepal slipped to 151 position out of 155 countries in the Logistics Performance Index (LPI) 2012. It ranked 147 in 2010 and 130 in 2007.[12] On the specific components of LPI, while there has been an improvement in the customs score and ranking, it has deteriorated in the case of infrastructure and logistics competence (Figure 7). Similar is the case with Global Enabling Trade Ranking (GETR), which shows that the enabling environment, including trade-related infrastructure and customs, for trade has deteriorated over in the last couple of years. Nepal’s ranking deteriorated from 110 in 2009 to 118 in 2010 and 124 in 2012.

Figure 7: Nepal’s logistics performance ranking
Source: Logistics Performance Index 2012, World Bank
Note: The numbers in parentheses indicate the number of countries included in the ranking.

Political instability and strikes: Over the past few years, frequent political and union related strikes along the main trade routes have disrupted production and distribution of goods and services. This has led to an increase in the ‘lead time’ (the amount of time between the placing of an order and the receipt of the goods ordered), which together with the natural high trading costs of being a land-locked country have contributed to an increase in delivery costs. In South Asia, Nepal has the highest export lead time (days) for land supply chain[13] (Figure 8), largely due to the 777 km of land supply chain[14], which is the longest and the most expensive when compared with other countries in the region. According to Doing Business 2014, it still takes 11 documents, 42 days and US$2,295 to export a container (Figure 9 and Figure 10). Furthermore, the business community has repeatedly complained about the high costs imposed by truck syndicates, leading to rise in cost of production.[15]

Figure 8: Export lead time (days) for land supply chain)
Source: Logistics Performance Index 2012, World Bank

Figure 9: Documents, time and cost of export
 
Source: Doing Business 2014, IFC

Figure 10: Export across borders

Source: Doing Business 2014, IFC

Recurring labor disputes: The recurring labor disputes, especially after FY2006, have been one of the thorniest issues in the industrial sector. It has not only disrupted production, but also contributed to the loss of established markets abroad and the closure of domestic firms. The garment industry has been hit the hardest. Once the highest foreign currency earner, the industry is now struggling to maintain and fulfill orders in time, especially after the end of the Multi-fiber Agreement (MFA) in 2005. By abolishing the quota regime, the end of MFA created a level playing field for all garments exporters to the US, resulting in the loss of market share to low-cost yet competitive exports from other countries. Nepal has one of the highest minimum wages in South Asia (Figure 11), but also one of the lowest labor productivities.[16] On an average, the annual labor productivity growth contracted by 6.8% in 2013, much larger than the 4% dip in 2009.

Figure 11: Monthly minimum wage in South Asia ($, current prices)

Source: ILO Global Wage Report 2013

Lack of skilled human resource: The lack of qualified human resources as well as the shortage of workers due to large-scale migration has affected production. Garment and pashmina productions are hit by the shortage of workers of all skills range. The exodus of youths has put pressures on wages, increasing industrial sector wages by an average annual rate of 10% since FY2006. The gap between the demand for and supply of workers of all skills range has hampered production, operations, management and marketing of goods and services.

Deficient research and development: The private sector itself has not been able to scale up research and development investment and training of staff, resulting in hardly any major product innovation in the entire production chains. The Nepalese exporters seem to be more reliant on market concession abroad than promoting efficiency gains and innovation within their own factories. In 2013, 26.1% of firms on average had their own website and only 8.2% had an internationally recognized quality certificate. Furthermore, only 31.9% firms offered formal training to staffs.

Policy inconsistencies and implementation paralysis: While the government has introduced elaborate policies, their implementation remains weak. The trade policy introduced in 1983 was updated in 1992 and 2009, along with the formulation of elaborate sectoral promotion strategies for export potential goods (Diagnostic Trade Integration Study [DTIS] in 2004 and NTIS in 2010). For example, after two decades of delay, the establishment and operationalization of the special economic zone (SEZ) in Bhairahawa has finally been initiated without the passage of the SEZ Act. Similarly, the ‘one window’ facility for exporters and provisions like ‘no work, no pay’ remain unimplemented. Several institutional arrangements envisaged in the trade and investment policies have not been formed. In a way, there has been policy inconsistencies (instability) and policy implementation paralysis. There is a possibility that the existing set of policies and sectoral promotion strategies may be termed ineffective without first fully implementing them and taking adequate time to evaluate the actual output.

V. Export Opportunities

Due to the nature and scope of the FTA with India and the pegged exchange rate, there exists tremendous potential for Nepal’s exporters to cater to the increasing demand for goods and services in India.[17] The five border Indian states—namely Uttarakhand, Uttar Pradesh, Bihar, West Bengal and Sikkim—have a combined population of over 400 million, average real GDP growth of over 7%, and average real per capita income growth of over 6% (except in Uttar Pradesh, which had 5% growth over FY2008-FY2012). Furthermore, along with the agreement to upgrade trade infrastructure at new customs points and to provide assistance to enhance technical skills, a number of outstanding tariff, para-tariff and non-tariff barriers were resolved in December 2013 during the Inter-Governmental Committee meeting between Nepalese and Indian commerce secretaries. This was followed by the ‘Bali package’ agreed during the Ninth Session of the Ministerial Conference of the WTO in January. The Bali package, as a part of the agreement on trade facilitation measures, includes provision for assistance to LDCs to enhance their infrastructure and build capacities of customs administration. On top of these, China and several developed countries, including the US, have accorded duty-free, quota-free entry to almost 97% of exported items.

Against this backdrop and the recent weakening of Nepalese rupee against convertible currencies, which makes Nepal’s exports relatively cheaper, there exists opportunities for Nepal to boost exports by addressing some of the supply-side constraints even in the short term. Nepal could better coordinate and utilize Aid for Trade (AfT) offered by development partners to boost not only software but also hardware aspects of trade. Similarly, other trade related technical assistance (TRTA) and the support from Enhanced Integrated Framework (EIF) to enhance sectoral technical, marketing, branding and processing capacities could be fruitful.[18]

To tackle some of the supply-side constraints in the short term, the government needs to ensure proper implementation of some of the provisions outlined in trade and industrial policies, especially those related to the promotion of export-oriented sectors and the 19 sectoral support strategies elaborately detailed in the NTIS 2010.

In the long term, an important export product as well as a stimulant to export-oriented sector is energy, particularly hydropower export to India.[19] Nepal’s immense water resource endowment and the potential to sustainably harness them make it a unique export item in itself. Furthermore, the adequate supply of hydroelectricity may substantially reduce the cost of production and also give rise to firms that could operate at various stages of the supply chains. Similarly, tourism is another export service whose further promotion may increase not only visitor inflows, but also revitalize hotel industry and associated businesses. However, this would require adequate upgrading of necessary tourism related infrastructure and services at various key destinations. Nepal ranked 112 out of 140 countries in the Travel & Tourism Competitiveness Report 2013, with even lower ranking in air transport infrastructure (121), ground transport infrastructure (137), tourism infrastructure (130), and ICT infrastructure (127). Encouragingly, Nepal ranks sixth in the world terms of price competitiveness in travel and tourism industry.

The other long-term measure to boost export competitiveness includes investment in either construction of new or upgrading of existing road network along the major trade corridors. Also equally important is the strategy to retain workers and develop their skills so that the export-oriented sectors do not face shortage of workers of all skills range. The increase in the cost of production due to high wages could be partially offset by enhancing operational efficiency and productivity of workers.[20] The upgrading of skills could also benefit migrant workers, who would be able to secure semi-skilled to skilled jobs overseas, allowing them to earn more income and remit more money back home. Properly matching skills development to the structure of industry as they evolve according to the pace of global value chain development and competition is a key to sustaining manufacturing sector growth in the medium to long term.
Regional economic cooperation in areas such as cross-border connectivity, regional trade facilitation measures, and energy trade will help reduce the cost of trade and bring about efficiency gains throughout the production cycle and value chains. Furthermore, more cooperation in trade and investment, and monetary and financial services will help promote exports by facilitating investments in priority sectors and credit flows to high-return sectors. The South Asia Subregional Economic Cooperation (SASEC) initiative—a regional economic cooperation investment-oriented partnership between Bangladesh, Bhutan, India and Nepal—is already working on building multi-modal transport networks and logistics hubs to facilitate trade. Similarly, SASEC is also working on developing a regional energy market, increase energy availability, improve energy trade infrastructure, and create a harmonized legal and regulatory frameworks.

VI. Conclusion

To fully utilize the substantial market access concessions it already has and to boost exports, Nepal needs to significantly improve its supply-side capacities.[21] This will require adequately addressing the crippling constraints—lack of adequate and quality infrastructure; political instability and strikes; recurring labor disputes; lack of skilled human resource; deficient research and development; and policy inconsistencies and implementation paralysis— to industrial activities, and a timely and effective implementation of the policies and sectoral strategies that are already in place.

The country also needs to properly utilize the technical assistance offered through various financing windows by multilateral and regional trading blocs, and development partners. This will also help boost private sector activities in export-oriented sectors, which is mostly dominated by small and medium enterprises. In the long term, along with improvements in the investment climate, the government will need to substantially increase investment in energy, transport corridors, skills development, technology transfer and adoption, supportive regulatory and institutional frameworks including SEZs, and overall stable macroeconomic environment. These are critical for product and market diversification as well as product sophistication to stay competitive and to make exports an important driver of inclusive growth, which is essential to absorb an estimated 633,000 new entrants annually to the job market by 2020.[22]




[1] Note that the growth rates are computed after converting exports and imports into US dollars using the yearly average buying exchange rate.
[2]R.Hausmann and B. Klinger. 2007.The Structure of the Product Space and the Evolution of Comparative Advantage. CID Working Paper No. 146. http://www.hks.harvard.edu/var/ezp_site/storage/fckeditor/file/pdfs/centers-programs/centers/cid/publications/faculty/wp/146.pdf
[3]It is also indicative of two things: (i) the export-oriented firms have failed to add much new capabilities, and (ii) the government’s initiative on this front is insufficient.
[4] SAFTA has been effective since 1 January 2006, and its member countries have committed to reduce tariff to a maximum of 5% on all tariff lines except for the items in sensitive list by 1 January 2016. Nepal joined BIMSTEC in February 2004.
[5] Nepal has also signed bilateral trade agreements with several countries, including PRC, Bangladesh, Sri Lanka, Pakistan, the UK, the US, and South Korea.
[6] It identified 19 products under the Special Focus Area (garments, woolen carpets, pashmina and silk products, and handicrafts) and Thrust Area Development (tea, vegetable seeds, large cardamom, pulses, floriculture, gold and silver ornaments as well as gems and stones, processed leather, ginger, herbs and essential oils, handmade paper and paper products, woolen craft products, coffee, honey, oranges, and vegetables) with an elaborate scheme to promote their production and export. While the products under the Special Focus Area are labor-intensive and already have established markets abroad, the ones under the Thrust Area Development are high potential export items.
[7] The products are cardamom, ginger, honey, lentils, tea, noodles, and medicinal herbs/essential oils in agro-product category; handmade paper, silver jewelry, iron and steel, pashmina, and wool products in craft and industrial goods category; and tourism, labor services, IT and BPO services, health services, education, engineering, and hydroelectricity in services category. Additionally, five more potential export products/sectors pointed out in the report are transit trade services, sugar, cement, dairy products and transformers.
[8]Among other commitments and provisions, the industrial policy also promises flexible labor policy, including the ‘no-pay-for-no-work’ policy. It allows for easy exit from business for promoters, freeing them from long-term labor and other liabilities. Tax and income rebate incentives and easy credit are offered to export-oriented firms. It promises tax holiday for 10, 7, and 5 years to firms that invest respectively in highly underdeveloped (21 districts), undeveloped (15 districts) and less developed (24 districts) areas, respectively.
[9] See: SAWTEE. 2012. Training Course on International Trading System. Kathmandu: South Asia Watch on Trade Economics and Environment.
[10] The situation is even worse for large firms with 100 plus employees. About 99% of large firms owned or shared generators and they supplied 38.4% of total electricity demand.
[11] This is slightly lower than 75.6% in 2009 probably because more firms were resorting to using generators to bridge the gap between demand for and supply of power.
[12] The total number of countries included in LPI in 2012, 2010 and 2007 was 155, 155 and 150, respectively.
[13] For port or airport supply chain, the export lead time is the highest (6 days) in Nepal when compared to other countries in the region.
[14] According to LPI 2012, this includes ‘the point of origin (the seller’s factory, typically located either in the capital city or in the largest commercial center) to the buyer’s warehouse’.
[15] Some traders also argue that the fixed transportation cost (trucks mainly) set by syndicates/cartels is higher than the combined cost of vehicle operation and transport bottlenecks.
[16] In 2011, the productivity of Nepalese a garment worker was 9.6 pieces of shirt in an 8-hour shift, whereas it was 25.5, 18.6 and 16 for Chinese, Bangladeshi and Indian worker, respectively. See: http://ceslam.org/index.php?pageName=newsDetail&nid=1109
[17] Furthermore, the bilateral trade cost of Nepal with India is the lowest. Compared to the trading cost with India, the bilateral trade cost with Bangladesh, PRC, the UK and the US is 2.9, 2.1, 2.5, 2.3 times higher, respectively.  For more on bilateral trade costs, see International Trade Costs by ESCAP and World Bank.
[18] Currently, EIF is supporting value chain development of ginger and pashmina in Nepal.
[19] Except for Sikkim, all other four bordering Indian states faced an estimated peak time deficit of 3,200 MW of electricity. Specifically, the peak time deficit in Uttarakhand, Uttar Pradesh, Bihar and West Bengal were approximately 24.3%, 19.1%, 20.2%, and 1.7%, respectively in FY2013.
[20] McKinsey& Company noted that Bangladesh’s garment industry, despite the recent tragedies, has been successful in offsetting rising wage costs by enhancing efficiency and boosting supply capacities. Readymade garment export of Bangladesh accounts for over 10% of GDP and 75% of total exports revenue. See: http://www.mckinsey.com/insights/consumer_and_retail/bangladesh_the_next_hot_spot_in_apparel_sourcing
[21] For instance, the applied ad valorem tariff on Nepal’s iron and steel export to India is zero while India’s bound tariff on such imports is, on an average, 25%. Even with this attractive market concession, Nepal’s share of iron and steel export in India’s total import was just 1.2% in 2010, i.e. India imported US$8.3 billion worth of iron and steel in 2010, but Nepal’s share was just US$102 million. Note that this included all iron and steel export of Nepal, meaning that Nepal is unable to fully utilize the existing market concession without boosting its supply capacity of those products in which it has comparative advantage (usually denoted by revealed comparative advantage greater than unity). For more, see: R. Adhikari and C. Sapkota.2012. A Study on Nepal India Trade. Kathmandu: South Asia Watch on Trade Economics and Environment.
[22] UNCTAD estimates the number of new entrants (working age population) to the job market will reach 633,000 annually by 2020, up from 550,000 in 2012 and 465,000 in 2005. See: UNCTAD. 2013. Least Developed Countries Report 2013. Geneva: United Nations Conference on Trade and Development. http://unctad.org/en/PublicationsLibrary/ldc2013_en.pdf

(Adapted from Nepal Macroeconomic Update, February 2014, Vol.2, No.1, published by ADB. Executive summary here.)