WTO Review Highlights Nepal’s Trade Reforms but Warns of High Costs, Weak FDI and Export Constraints

Originally Published : 13/04/2026
Nepal Register publication : October 27, 2026
3 min read

Summary:

Nepal’s 2025 Trade Policy Review highlights major reforms in customs, investment, e-commerce and energy trade, but warns that high trade costs, persistent deficits, sluggish foreign investment and limited export diversification remain major obstacles ahead of LDC graduation in November 2026.

Nepal significantly expanded its trade and investment reform agenda between 2018 and 2025, according to the Nepal Trade Policy Review 2025, which combines the government’s country report with an assessment by the WTO Secretariat. Nepal’s GDP per capita rose from about USD 1,204 in FY 2018/19 to USD 1,434 in FY 2023/24, while merchandise exports increased from USD 860 million to USD 1.15 billion. However, India remained dominant, accounting for 67.7% of Nepal’s exports and 62.6% of imports, while textiles alone represented roughly one-third of merchandise exports.

The review notes substantial regulatory modernization, including the Trade Policy 2025, Nepal Trade Integration Strategy 2023, E-Commerce Act 2025, Customs Tariff Act 2024 and reforms to foreign investment laws. Nearly 99.8% of cross-border trade is now processed through ASYCUDA World, while the Nepal National Single Window and electronic customs payments have expanded digital trade facilitation. Nepal also reduced the general minimum FDI threshold from Rs 50 million to Rs 20 million, removed the minimum threshold for eligible IT investments through the automatic route and widened opportunities for foreign investment.

Despite those reforms, the WTO assessment points to persistent structural weaknesses. Nepal’s trade costs were estimated to be 44% higher than those of SAFTA members, while annual FDI inflows fell from USD 67.1 million in 2018 to USD 57 million in 2024, despite reaching USD 196 million in 2021. The country continues to face weak infrastructure, limited productive capacity, inadequate standards and connectivity, heavy dependence on imported inputs, slow technology adoption and poor integration into regional and global value chains.

The report identifies hydropower, agriculture, tourism, ICT and digital services as major opportunities for future export and investment growth. Nepal became a net electricity exporter in FY 2024/25 and has begun selling power to Bangladesh through India, while reforms are also targeting digital trade, value-added manufacturing and regional connectivity. With Nepal scheduled to graduate from Least Developed Country status in November 2026, the government has called for continued duty-free and quota-free market access, Aid for Trade, preferential rules of origin, technical assistance and other transition support to prevent the loss of LDC benefits from undermining export competitiveness.