Nepal is one of the beneficiaries of the preferential trading regime. The Nepali traders and the Government can have tariff-free access to the European market for their exports.  Although many other Least Development Countries (LDC) have succeeded to reap substantial benefits from this provision, Nepal is yet to make full use of the facility, mainly due to its narrow export base and competence in international quality standards. 

In 2019, the EU as a single market accounted for 9.4% of Nepalese exports (EUR 81M) and 2.7 % of the country’s imports originated from the EU (EUR 305M1). The EU imports mainly textiles and clothing from Nepal and exports mainly machinery and transport equipment, chemicals, agricultural products and other manufactures. On the EU’s side, Nepal ranks the 153th partner country in overall trade value. 

The European Union has been supporting the government of Nepal to graduate from LDC status and for sustainable and equitable economic development and prosperity through trade and investment-led growth. Initially, €2 million, WTO accession programme to help Nepal tackle the issues of Sanitary and Phyto-sanitary Standards (SPS) and Technical Barriers to Trade (TBT), followed by Trade and Private Sector Development Programme (TPSD) with €7.2 million until 2019 and currently with EU-Nepal Trade and Investment Programme (TIP) 2020-2024 with €8 million. The TIP contributes with sectors that are expected to have trade losses upon LDC graduation to achieve sustainable and inclusive economic growth and poverty reduction by increased trade through competitive value-chains and improve the investment climate for attracting Foreign Direct Investment. The programme also helps Nepal to formulate policy measures to overcome the impact of COVID 19, and prepare Nepal to avail GSP+ preferences, which would significantly limit losses in the EU markets arising from LDC graduation.  

The EU is assisting Nepal to respond to global challenges and opportunities in the light of the 2030 Agenda for Sustainable Development. The EU and the Government of Nepal work closely to frame the needs and identify opportunities for better driving actions to promote sustainable growth, development of a green economy, and economic prosperity. In particular, the EU aims to support the efforts at local level to achieve a green economy, green jobs and sustainable growth by promoting Nepal’s natural resource-based sectors such as energy, forest, and agriculture as they play a key role to improve livelihoods of local communities.  

The EU will support Nepal’s Green, Resilient, and Inclusive Development (GRID) to scale up and align investments, enhance the policy environment, and convene institutions and information. The GRID approach aims at establishing a strategic long-term platform that involves a fundamental shift in managing risk and development from a simple reactive response mode to a deliberate proactive recovery strategy for long-term green growth, climate action, and sustainable development. The GRID approach will be instrumental to build a green, resilient, and inclusive economy by converting the challenges of the COVID-19 into opportunities for sustainability, prosperity, jobs and growth.  

Simultaneously, the EU continues to implement the European Green Deal to tackle climate and environmental-related challenges. The EU Green Deal provides a new avenue to continue the EU-Nepal partnership to transform Nepal into a green and resource-efficient economy by turning climate and environmental challenges into opportunities in line with the Paris Agreement and Nepal’s Nationally Determined Contributions. It will also continue to extend support under other EU strategies such as circular economy, biodiversity, farm to fork, etc. for Nepal’s fair transition to a green and circular economy. 

The EU will continue to lead the way to a circular economy using its influence, expertise and financial resources to implement the 2030 Sustainable Development Goals as circular economy offers various possibilities for businesses to expand and develop profitable growth while recycling and using materials efficiently.  

In addition, the EU along with other EU Financial Institutions is exploring opportunities to inject additional funds under a blending facility for projects to protect the environment and retard the climate change process by promoting cleaner production and green economy, for which the EU plans to invest a grant support of €10 million. 

The ECHO has been present in Nepal since 2001, providing humanitarian assistance to people affected by conflict and major natural hazards, including the devastating 7.8-magnitude earthquake in 2015 which claimed close to 9,000 lives and destroyed more than half a million homes. During Nepal’s internal conflict, and up until 2011, EU humanitarian actions have supported thousands of conflict-affected people, especially in rural areas, by providing healthcare as well as water and sanitation facilities. The EU also assisted refugees from Bhutan for more than 10 years until 2015.

Due to increased disaster risks posed by the climate crisis, EU funding in Nepal over the last few years has focused on supporting initiatives that aim to strengthen the disaster preparedness of local institutions and assisting them in programme implementation. Key priorities include strengthening the emergency response capacity of rural and urban municipal authorities to manage natural hazards such as floods, landslides, fires and earthquakes.

Since 2001, ECHO has contributed almost €32 million to disaster preparedness and risk reduction activities in Nepal, including €2 million allocated for 2021. Its sustained advocacy efforts have contributed to the formulation of the "National Strategy for Disaster Management in Nepal”.

To respond to the ongoing COVID-19 outbreak, ECHO has allocated Euro 5 million to procure medical equipment and supplies and to manage home isolation cases, and support for national and international emergency medical team deployment. The EU Member States and other countries are responding to the request of the government to fight the pandemic by airlifting much-needed medical items, including surgical face masks, ventilators, oxygen cylinders, gloves, and isolation tents.

Contribution to adopt policies and practise the principles of human rights, democracy, rule of law and good governance are some of the crucial aspects of EU support to Nepal. Collaboration with government mechanisms, multilateral agencies and CSOs have focused on an inclusive, just, peaceful and prosperous society. Stakeholders acknowledge and appreciate the remarkable EU support to combating discriminatory social practices, fostering inclusive and participatory human development and peacebuilding efforts. Strengthened institutional capacities, increased responses and monitoring of both the oversight mechanisms and CSOs have led to some interesting results against exclusion, and increasing participation, accountability, and transparency of the government processes. Together with its Member States, the EU collaboration with Human Rights Defenders and their strengthened voice and practices have contributed to expand the democratic space and the realisation of fundamental freedoms in Nepal. 

A small CSO initiative such as eliminating the traditional harmful Chhaupadi practices has a huge impact and contribution to fostering gender equality, social inclusion and participatory decision-making process. Some excellent examples of such support include the women empowered by CSO projects who not only took lead on the evidence based policy dialogue, but also succeeded them contesting local elections and assuming leadership positions.  

In Nepal, the EU is supporting the government to expand equitable access to school and to improve the quality of education, governance, and resilience of the education system. The EU policy dialogue is focused particularly on three dimensions, namely early grades reading, disaster risk management and equity. Children from the poorest households, children with disabilities, and children from deprived communities are benefiting from the consolidated equity strategy developed by the Ministry of Education to track inequalities in school education, with the support of the EU and other development partners.

Targeted interventions are being implemented to mitigate the impact of the COVID 19 pandemic in the most vulnerable students and in the most remote areas to ensure continuity of learning and to reduce school dropout.

The EU is enabling Nepal to make its schools more gender-equitable and social-inclusive.

The EU support in TVET reform entails strengthening and more effectively implementing a TVET policy responsive to labour market needs, as well as piloting and integrating the Public Private Partnership (PPP) approach in three key economic sectors: agriculture, construction, and hospitality and tourism, in order to offer opportunities for promoting the transition to a greener, climate-resilient, and low-emission economy. The TVET-PP is going forward to help reduce youth unemployment by improving access to relevant and high-quality TVET, which will increase their employability and provide them with better economic opportunities in the future.

Sustainable rural development is of fundamental importance to Nepal: 80% of the population lives in rural areas, where poverty affects nearly one out of three persons. Many Nepali leaving in rural areas still do not have access to some basic services such as drinking water, sanitation, nutrition. Agriculture employs two-thirds of the population, yet accounts only for one-third of the national GDP. It is the main if not only source of income for most of the rural population. However, productivity remains low and food insecurity and malnutrition remain high.

To address these issues, rural development is a focal area of support for the EU. Sanitation and drinking water facilities are developed in the western part of the country. This has been made possible through a partnership between EU and Finland. A multi-sector approach has been adopted and promoted to reduce malnutrition in the poorest districts of the country. EU is now supporting the national scaling up of nutrition.  

Finally, to support the efforts of the government to develop the agriculture sector, the EU contributes to funding the national Agriculture Development Strategy, which envisions a self-reliant, sustainable, competitive, and inclusive agriculture sector that drives economic growth, and contributes to improved livelihoods and food and nutrition security leading to food sovereignty.