Medicinal and Aromatic Plants

Abstract

Medicinal and aromatic plants (MAPs) offer opportunities for sustainable economic growth in Nepal.Nepal currently does not hold a significant share of global markets for MAPs, but MAPs are relatively more important in Nepal’s export basket compared with other countries.Nepal currently does not hold a significant share of global markets for MAPs, but MAPs are relatively more important in Nepal’s export basket compared with other countries.Market access is affected by non-tariff measures in this sector.Currently, Nepal primarily competes in the segment of raw and unbranded MAPs for the non-discerning user. This segment has minimal value addition and a high degree of global competition.This study identifies two segments where Nepal is well positioned to compete in the short to medium term: (i) lightly processed products for the discerning and conscientious consumer, specifically personal care products; and (ii) heavily processed, mass-produced products for non-discerning buyers, specifically Ayurvedic and traditional medicine products.Personal care products are an attractive market segment for individual Nepali entrepreneurs and micro, small and medium enterprises (MSMEs).Nepali firms have the potential to integrate into regional and global value chains for traditional herbal and Ayurvedic medicinal products.While Nepali firms have the potential to compete successfully in the two identified segments, they face many challenges that need to be addressed. Many of the constraints in the MAPs value chains in Nepal are similar to those across the broader agribusiness sector.These challenges include issues with land rental and aggregating land; lack of investment in physical infrastructure; lack of R & D; distortions in input markets (fertilizer and seeds); poor extension services; inadequate support for building firm capabilities; weak quality infrastructure (for testing and certification) that restricts access to foreign markets; poor logistics; insufficient investment in supply chains; and poor access to finance for smaller players in the sector.Sustainability of MAPs is a major concern, especially in higher elevation areas, and requires continued conservation efforts.The government should ease trade frictions for suppliers providing raw materials to domestic manufacturers.In the personal products segment, Nepali firms could benefit from a more conducive environment for e-commerce and skills development.The Ayurvedic and traditional medicine products segment in Nepal could benefit from protecting Nepal’s cultural heritage and traditional medicine systems, implementing intellectual property rights (IPR) polices to support private sector growth and attract FDI, and research support to identify the intensity of specific MAPs in their most common final products.Global demand for MAPs, especially as inputs for more complex final goods, has been increasing steadily since the turn of the century. Nepal has the potential to tap into this demand and compete successfully in this market if the challenges faced by Nepali players in the MAPs value chains are addressed.