While many Asian manufacturing hubs such as China, India, Bangladesh, Vietnam, Cambodia, Sri Lanka, and Pakistan now face elevated U.S. tariffs (ranging from 37% to 54% on categories like textiles and apparel), Nepal enjoys a flat and comparatively low tariff of just 10% across many of these same categories.
A Hidden Advantage Comes to Light
This new trade dynamic is reshuffling supply chains across the globe. Brands and importers are urgently seeking cost-effective, tariff-friendly alternatives, and Nepal is emerging as a quiet yet strategic winner in this transition.
Where Nepal Holds Competitive Edge
Nepal has strong potential across several high-opportunity sectors:
- Textiles & Garments – Ability to absorb redirected orders from heavily tariffed countries.
- Handicrafts, Carpets & Pashmina – Distinct cultural identity + lower duty.
- Pet Food & Dog Chews – A growing niche where Nepal has already built traction.
- Specialty Tea & Herbal Products – High value, low volume, ideal for export.
- Leather & Handmade Goods – Sustainable, artisanal products with global appeal.
- Light Manufacturing & Assembly Plants – Potential to grow export-oriented manufacturing.
- Jewelry & Accessories
As traditional supply chain giants are penalized by tariffs, Nepal can position itself as a cost-effective, tariff-efficient alternative if Government of Nepal moves quickly and strategically.
What the Nepalese Government Can Do (Short-Term Priorities)
To fully capitalize on Nepal's emerging tariff advantage, the government should act decisively across policy, infrastructure, finance, and trade facilitation areas.
- Fast-Track FDI & Business Approvals
- Set up a dedicated FDI fast-track desk at the Ministry of Industry or IBN.
- Empower online, time-bound FDI approvals through a centralized platform.
- Provide automatic route FDI for pre-defined export sectors.
- Sector-Specific Tax Holidays & Export Incentives
- Offer 5–10 year tax holidays for export-oriented units in priority sectors.
- Provide duty drawbacks and VAT refunds on input materials used in exports.
- Introduce subsidized export credit schemes for SMEs and exporters.
- Ease of Doing Business Reforms
- Simplify company registration, licensing, and permit procedures.
- Roll out online filing and single-window clearance systems for business setup.
- Establish a “Start Operations in 30 Days” program for manufacturing units.
- Customs & Logistics Modernization
- Modernize customs checkpoints with electronic clearance and AEO (Authorized Economic Operator) status.
- Digitize and automate export/import documentation (e.g., e-CERT for origin certificates).
- Improve coordination between customs, NRB (central bank), and port authorities.
- Special Economic Zones (SEZs) Activation
- Make SEZ land easily accessible to investors on lease-to-own or PPP models.
- Provide plug-and-play manufacturing infrastructure with reliable utilities.
- Grant income tax exemptions, custom duty waivers, and export-processing support inside SEZs.
- Trade Promotion & Bilateral Engagements
- Aggressively promote Nepal’s tariff benefits via embassies and trade missions.
- Sign bilateral trade facilitation MOUs with the U.S., EU, and ASEAN buyers.
- Co-market "Nepal as a Sourcing Destination" with chambers and export councils.
- Workforce & Skills Development
- Launch sector-specific skill training centers (e.g., textile stitching, herbal processing).
- Partner with private sector and donor agencies for vocational training programs.
- Promote women’s employment in labor-intensive sectors like garments and handicrafts.
- Access to Finance for Exporters
- Provide export refinance lines, working capital support, and interest subsidies.
- Encourage banks to prioritize lending to registered export units.
- Introduce credit guarantee schemes for MSME exporters.
How Professional Accountants, Auditors & Advisors Can Support This Transformation
As enablers of business growth and compliance, professional accountants, auditors, and consultants have an even broader role to play in this transition. Here’s how we can step in:
- FDI Structuring & Entry Strategy
- Advise foreign investors on best legal entity structure, joint ventures, or 100% subsidiaries.
- Assist with capital repatriation planning, double taxation treaties, and ownership regulations.
- End-to-End Business Setup
- Provide step-by-step support for Company registration, Tax registration (PAN/VAT),
Foreign currency approval from NRB, Bank account opening etc.
- Liaise with government bodies to expedite approvals.
- Tax & Customs Advisory
- Identify tax-saving opportunities through optimal structuring.
- Advise on customs duty classifications, tariff codes, and exemptions.
- Help clients qualify for export incentives and subsidies.
- Cost & Feasibility Analysis
- Perform cost-benefit analysis of relocating supply chains to Nepal.
- Run financial projections, margin analysis, and export pricing models.
- Assist businesses in comparing Nepal vs. regional competitors.
- Outsourced CFO & Financial Controller Services
- Offer virtual CFO services to small and medium foreign investors.
- Handle budgeting, forecasting, financial control, and cash flow management.
- Present board-level financial insights to foreign headquarters.
- Trade Compliance & Reporting
- Assist exporters with certificate of origin, LC documentation, and customs filings.
- Ensure regulatory compliance with NRB, Department of Customs, and trade policies.
- Handle audit and assurance aligned with international buyer requirements.
- ERP & Systems Advisory
- Help businesses adopt cloud-based accounting and ERP systems (e.g., Zoho, QuickBooks, Tally).
- Build export-specific workflows for inventory management, costing, and shipment tracking.
- ESG & Impact Reporting
- Provide frameworks for Environmental, Social, and Governance (ESG) compliance.
- Help exporters report on sustainability practices, now demanded by many U.S./EU buyers.
- Support carbon accounting, if applicable, to meet global standards.
- Capacity Building & Training
- Offer workshops on Export documentation, Digital accounting and tax filing, Trade
finance instruments (LCs, export credit, etc.)
- Train client teams to maintain internal controls and improve financial literacy.
Call to Action
Nepal is well-positioned to turn external tariff pressures into an internal economic boom—but only if government, private sector, and professional advisors act in unison.
By accelerating reforms and leveraging professional expertise, Nepal can attract high-quality foreign investment, create thousands of jobs, establish itself as a resilient, tariff-advantaged export hub in South Asia.
Final Thoughts: Nepal’s Moment Is Now
The current tariff reshuffle is not just a challenge for some economies; it's a rare window of transformation for Nepal. With a favorable trade position and untapped manufacturing potential, the country can attract meaningful foreign investment, generate employment, and move up the global value chain.But this window won’t stay open forever. To capitalize, policy reform must move hand-in-hand with private sector support, and accounting professionals must guide this transition with sound advice, strategic insights, and global best practices.
Let us all turn tariff pressures into economic progress, together.
About the author Bidur Luitel is a practicing Chartered Accountant and can be reached at luitel.bidur@gmail.com.
