|Exports of Ayurvedic Herbal Remedies and SPS Issues: A case study by WTO|
|The local and external players and their roles|
|Challenges faced and the outcome|
|Lessons for others (the players’ view)|
Chief, WTO Cell, Garment Association of Nepal, New Baneswor.
I. The problem in context
When his company received a hefty order from a Swedish importer in August 2000, Prem Raj Tiwari rejoiced with much enthusiasm at a relatively big business deal. The single largest export order the company ever had for ayurvedic products — processed medicinal herbs — had strengthened his aim of reviving the company’s languishing export trade by cashing in on the flourishing world demand for herbal products. But Tiwari’s enthusiasm was soon dashed when he received an e-mail from his Narkayrd-based Swedish counterpart withdrawing the order. The mail stated that the company’s product samples did not pass the ‘satisfactory and sufficient’ sanitary and quality standard tests for access to the Swedish market. Moreover, Tiwari was astonished to learn of the requirement for a certificate of good manufacturing practices (GMP) for each consignment.
Until this incident, Tiwari had not been aware of the requirements for such a specific test and the GMP certificate in order to be able to export the company’s products. The GMP is a system of quality assurance and quality control not only for the products themselves but also for the pre- and post-manufacturing processes to ensure sanitation and the minimization of the risks inherent in food and medicinal production, processes which cannot be assessed by only testing the final products.
Tiwari’s company, the Gorkha Ayurved Co. — a joint venture between Nepalese and French investors had gained about 6% of the domestic market for herbal products. One of the major products of the company was the herbal tea sold under the established brand name Guduchi, known as a health drink. The popularity of Guduchi had, in fact, tempted other herbal firms into imitation of the brand name. Other key products manufactured by the company were about fifty herbal remedies, based on ayurvedic medicines or traditional health science. Satisfied with the sales volume in the local market, which allowed the company to break even, Tiwari, the managing director, contemplated good prospects for the export of ayurvedic medicines, as he had received business inquiries from Germany, France, Italy, Sweden, the Czech Republic and Australia over the previous couple of years.
Since Tiwari joined the company as a financial consultant in 1999, he had seen tremendous scope in this sector, for two main reasons. First, the international demand for herbal products was growing at an annual rate of 10% on average, and the global market for herbal medicines was expected to reach US$16 billion by 2005, according to a recent study. Second, Nepal had witnessed a smooth growth trend in export of herbal products, indicating one of the most potential areas of comparative advantage. That had resulted in an increased number of foreign investors — particularly the popular Indian herbal product manufacturers — being attracted to Nepal to exploit the country’s favourable climate and abundance of a wide variety of aromatic plants and medicinal herbs. Nepal is endowed with more than 700 species of medicinal and aromatic plants, of which 250 species are endemic. These companies had firmly established backward and forward linkages and had exported products made from Nepalese herbs under their own brand names. However, Nepal’s share in the global market for the product range remained minuscule, despite promising signs.