Figure 30. Extent that customs and trade regulations hinder business growth of Agribusinesses

Key Takeaways: barriers to growth disaggregated by sectors

1.79% in 200918 . The international bandwidth per internet user was 21 kbit/second in 201719 .Limited internet connectivity discourages tourists from staying in the area for a longer period. Furthermore, it hinders marketing effort and the set-up of online payment system that could benefit Nepalese enterprises instead of Indian and Chinese operators. Inadequate business development services: Accounting services, advertisements, and market information services were the most used and appreciated services. Uptake of strategic services was generally low. Training for workers did not fully meet expectations of companies. Inconsistent coverage of financial services: Enterprises were satisfied with the services from the banks. Financial services of other types of financial services providers did not fully meet expectations of companies.

6.1 Agribusiness: barriers to growth

This section provides a detailed description of the constraints faced by businesses for the agriculture sector.

6.1.1 Customs and trade regulations

All women-owned enterprises and exporters rated customs and trade regulations as “serious problem.” Majority of the agribusinesses in Lumbini and arnali considered it a “serious problem.”

Figure 30. Extent that customs and trade regulations hinder business growth of Agribusinesses

18 https://data.worldbank.org/indicator/IT.NET.USER.ZS?locations=NP 19 https://www.itu.int/en/ITU-D/Statistics/Dashboards/Pages/Digital-Development.aspx

Key factors that inhibit growth and impact competitiveness of agribusinesses include trade and customs regulations, lack of testing laboratories, insufficient supply of raw material, limited access to storage facilities, limited business development services and challenges in accessing finance.

Challenges in the trade gateways. It is possible that some of the challenges experienced by respondents in Lumbini and Karnali were in relation to the Birgunj Inland Container Depot (ICD) and Integrated Check Post (ICP) in Province 2, which is the most important international trade gateways in the country. Some of the problems in the Birgunj ICD and ICP are: (Bajracharya 2021)

● Congestion due to inadequate warehousing facilities resulting to increased cargo clearance time. ● Lack of clear understanding regarding the scope of work hindered coordination between concerned bodies such as the municipalities, trade associations, agent associations, and the chamber of commerce, which ultimately affects the efficiency of overall trade. ● Poor digital infrastructure at customs which results in physical paperwork for clearance of goods. ● Delayed release of consignments due to unprofessional attitude of agents. In some cases, goods were damaged due to poor handling. ● Sanitary and phytosanitary standards (SPS) testing have to be conducted in laboratories far from customs points. ● Delay in customs clearance at the Kolkata ports, which increased demurrage cost, thereby increasing trade cost as well as contribute to deterioration of product quality. ● Poor toilet facilities in ICD and ICP and lack of accommodation facilities and eateries.

Trade facilitation challenges in Lumbini. In a Time Release study conducted in the Bhairahawa Customs Office (Lumbini Province), which is the second largest Customs station in terms of trade volume, revenue collection, and declarations, the following were the key findings: (DoC 2020)

● Delays in custom clearance and payments were caused by lack of documentation requirements due to ignorance of requirements by importers or exporters. Some of the importers, exporters and freight forwarders were not aware of the complete customs processing system. ● Delays were also caused due to lack of customs staff. ● Laboratories for testing the foodstuffs and similar goods are situated far from the customs premise which caused extended customs processing time. Likewise, the certification required multi-layer approval which made the process complex and time consuming. ● Slow internet speed, poor network connection and lack of compatible devices also caused delays in processing. ● Disputes in valuation necessitated extended time for customs clearance.

Procedural obstacles in customs clearance. Based on studies from the Asian Development Bank and the International Trade Centre, the following are the key procedural obstacles related to customs clearance: (ADB 2019) (ITC 2017)

● Delays in customs clearance due to shortage of human resources, lack of automation, and corruption. ● Procedures, regulations, and requirements are applied inconsistently at customs. ● Excessive documentation requirements cause significant loss of time and cost. ● Lack of coordination and cooperation among various government bodies as well as among quarantine posts and checkpoints lead to the need to obtain approval from several entities. ● Producers lack proper information on necessary processes and requirements to export. Some had to hire agents which increased the cost of the products which eroded price competitiveness.