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Nepal’s landlocked position between India and China, two of the world’s fastest-growing economies, presents both challenges and opportunities. On one hand, Nepal’s dependence on external gateways for international trade increases shipping costs, extends delivery times, and exposes exporters to monopolistic practices by shipping lines and intermediaries at transit or transshipment ports. These inefficiencies, coupled with risks of fraud in the supply chain, have reduced Nepal’s competitiveness in the global market.

Logistics costs in Nepal are estimated to account for about 25–30 percent of the total value of products, factoring in documentation time, bank and customs procedures, and transit delays. This high cost base hinders exports and slows industrial growth.

Yet, Nepal also holds distinct advantages. Its strategic location at the crossroads of South and East Asia, the potential to expand its manufacturing base, and a strong private sector active in freight forwarding for exports all position the country for growth. However, import handling, customs brokerage, warehousing, and distribution services remain underdeveloped.

In the absence of an integrated Industrial and Logistics Master Plan (ILMP), Nepal has been unable to fully leverage these strengths. The ILMP seeks to bridge this gap by integrating trade facilitation, industrial development, and logistics modernization into a unified national strategy. It recognizes logistics as the fourth pillar of competitiveness—alongside policy, infrastructure, and skills—and envisions transforming logistics into a sector that drives industrial diversification, export growth, and regional integration.

Why industrial–logistics synergy matters

For a landlocked economy like Nepal, efficient logistics are crucial for reducing trade costs, improving reliability, and connecting businesses to regional and global value chains. Fragmented logistics systems impose high transaction costs, cause unpredictable delivery schedules, and undermine confidence in international trade.

Integrating industrial and logistics planning means ensuring that dry ports, ICDs, logistics parks, cold chains, and customs points are physically and operationally linked to industrial zones, SEZs, and trade corridors. It also requires aligning industrial investment policies with those promoting logistics service providers (LSPs), enabling both sectors to grow in tandem and attract greater foreign direct investment (FDI).

Nepal’s logistics and industrial ecosystem

Over the past decade, Nepal’s logistics landscape has evolved significantly. The country now has dry ports and inland container depots (ICDs) in Birgunj, Bhairahawa, Nepalgunj, Biratnagar, Chobhar, and Tatopani, among others. The private sector, especially members of the Nepal Freight Forwarders Association (NEFFA), has played a key role in linking customs operations, transportation, and storage along major supply chains.

Despite these gains, challenges persist: limited multimodal connectivity, long border wait times, a complex policy environment, inadequate infrastructure for cold chain and e-commerce logistics, and limited adoption of digital systems for supply chain management and risk mitigation.

The ILMP aims to address these issues by ensuring that logistics are treated not as an afterthought but as a core component of industrial policy, fostering closer coordination between production hubs and logistics nodes.

Regional context: Corridors for connectivity

Nepal’s unique location between India and China makes it an ideal candidate to evolve from a landlocked to a land-linked nation, a vital transit bridge in South and East Asia. The South Corridor (India–Nepal) remains Nepal’s primary trade route through Indian ports, while the North Corridor (China–Nepal) and the East–West domestic corridor present new opportunities for balanced industrial growth and regional integration.

However, high costs, lengthy procedures, and repetitive documentation requirements across borders continue to constrain trade. Strengthening regional connectivity therefore requires proactive diplomatic and technical negotiations with transit countries—supported by a robust logistics master plan that builds confidence among neighbors to use Nepal’s territory as a transit or transshipment route.

Responding to global megatrends

Global supply chains are being reshaped by three major forces: digitalization, decarbonization, and resilience. To stay competitive, Nepal must embrace these trends by developing digital trade systems, promoting green logistics infrastructure, and building resilient, shock-absorbing supply chains that can adapt to global disruptions.

Vision for the future

Nepal’s vision should be to transform itself from a landlocked country into a land-linked, competitive, and sustainable industrial and logistics hub connecting South and East Asia. This vision centers on empowering small and medium enterprises (SMEs), integrating into global supply chains, and boosting national competitiveness.

Strategic priorities include: developing industrial-logistics corridors; strengthening private sector participation; accelerating digitalization; ensuring environmental sustainability, and building human capital to drive logistics innovation

The way forward

Freight forwarders and logistics service providers identify five key strategies outlined in the ILMP to realize this transformation: integrated planning, infrastructure modernization, policy coherence, governance and skills development, and regional integration

The Industrial and Logistics Master Plan (ILMP) is more than a blueprint for infrastructure; it is a roadmap for Nepal’s transformation. By positioning logistics as a catalyst for competitiveness, openness, and resilience, the ILMP represents a shared vision between policymakers and freight forwarders to turn Nepal’s geography from a constraint into an advantage. It marks a strategic shift from being landlocked to becoming land-linked, unlocking Nepal’s potential as a dynamic connector between the world’s fastest-growing regions.

 

Nepal’s logistic sector needs to work towards transforming supply chains through digital platforms and technologies. Despite the rapid advancement of the global supply chain, we continue to rely on traditional methods. The World Bank has been suggesting the government on the agenda of digitalization, but a lack of coordination among government stakeholders has been obstructing the move. The integrated border management system (IBMS) from the World Bank will help streamline the border issues as well as help proper planning from the transit point until the logistic centers and electrical cargo tracking (ETCS) system of ADB with some amendments would help in the transit and domestic flow of goods. The trade facilitation and cross-border paperless trade agendas have been pending for a very long time with little to no activities. Further, involving freight forwarders in the Nepal National Single Window (NNAW) is pending .

The bilateral and regional agreements are all being executed in a very traditional manner, without incorporating modern automation and digitalization mechanisms to ease business and increase traceability, predictability, and accountability to facilitate and meet global supply chain demands.

The customers demand and expect faster, more transparent, and personalized service. To meet their expectations, we need to utilize digital platforms to enhance the customer experience through better tracking, faster delivery, and improved communication to ensure seamless integration of data across different systems and platforms associated with government and private sector service providers. This demands developing data formats and communication between actors in trade facilitation. Another significant challenge is adopting new technologies, scaling them throughout the supply chain through pilot projects in controlled environments before scaling, and making sure these components are simple to integrate and adapt.Protecting sensitive supply chain data from cyber threats is another important and burning issue. Implementing cybersecurity measures, such as encryption, multi-factor authentication, and regular audits, can overcome this by ensuring the accuracy, consistency, and timeliness of data across the supply chain. Data governance policies, as well as the use of data validation tools to maintain high data quality and implement digital signatures, could be useful methods.

The cost factor associated with implementing new digital technologies is high. Still, there is a need to do a cost-benefit analysis and seek cost-effective solutions or phased implementation approaches to manage cost factors. Implementing automation through digitalization has proven successful in many countries, as it helps monitor the flow of goods, documents, money, data, and information among all those associated with the supply chain.

It is essential to change the mindset and adapt to change management by motivating the workforce through proper training, enhancing their digital knowledge, and addressing cultural and operational changes within organizations such as the Departments of Customs and Commerce, as well as both private and government logistic service providers.

Therefore, developing comprehensive training programs and change management strategies to help employees adapt to new technologies is a must, as is setting fixed regulations and standards across different actors and government support agencies to ensure compliance through regular audits. Another challenge is balancing digital transformation with sustainable practices to lessen environmental impacts through monitoring and evaluation. Other precautions include integrating new digital technologies with existing systems using middleware solutions and gradual transition strategies to avoid disrupting operations.

The transition to digitalization in the supply chain requires many issues to be addressed. Some issues require a strategic approach, leveraging the latest digital tools and technologies while ensuring alignment with overall business objectives and maintaining flexibility to adapt to future changes. Implementing IoT devices, real-time tracking, and advanced analytics to monitor and optimize supply chain performance will enable real-time visibility for analytics purposes while also easing the process of doing domestic and international trade.

The cases of fraud have been rising since the emergence of the Covid-19 pandemic. Law enforcement agencies and regulatory bodies worldwide are grappling with financial crimes. In this situation, there is also a need to be cautious and think of possible fraud risks associated with supply chain disruption, which has surrounded the global economy for the last three years. It has become important for the government and agencies concerned to pay attention to the unforeseen consequences of such crimes with the right set of priorities for supply chain and resource control. Past lessons on business resilience have shown that supply chains need to be planned tactfully to stay effective within the current business context, but there is also a need to effectively manage the risks. It is important to understand handling the challenges in order to avoid significant financial impacts as well as hassles due to supply chain disputes. Nepal has a very unique transit mechanism and proper trading terms set by the International Chamber of Commerce (ICC) are not followed here. Further, the custodian right of goods produced in Nepal is in the hands of Indian clearing agents authorized by exporters and importers with the power of attorney by the importers' respective banks, be it for letters of credit (LC) or the Telegraphic Transfer (TT) based exports and imports. More importantly, there is no liability transfer law nor there is a provision to cover multimodal insurance. Random LC terms are used which are beyond normal practice in international trade and the provision of control of import and export at Kolkata are for Nepalis only. The chances of goods being diverted within India and only documents arriving at the border could be one of the cases. All formalities at border points are carried out with the arrival and exit of trucks recorded and taxes paid, but there are some cases of goods being diverted elsewhere than the destinations that we have been hearing recently. Supply chains are inherently susceptible to fraud due to several factors mentioned below:

1. There are several actors and several activities within and beyond borders with different legal provisions. Various means of transport are used, and each has different responsibilities, liabilities, and standards that need to be complied with.
2. The complexity of the operating environment, including the mandatory involvement of third-party logistics service providers, is beyond control due to provisions set in the bilateral agreements and treaty between Nepal and India.
3. The volume and scale of transactions vary from less than a container to huge volumes in containerized or bulk and break-bulk movements and rotating L/C are in use. Additionally, the present volatility in supply and demand for goods and services arising from the Covid-19 pandemic are constraints in mobility. The situation pushes for scaling back costs as businesses are faced with unprecedented challenges of shipment delays with a monopoly in the hands of shipping liners.

We need to be aware that links in the supply chain create chances for financial fraud and foster corruption leading to disruption in the risk management system. There have been rampant cases of uncontrollable fraud attempts related to Covid-19 trade disruptions and this trend is expected to rise even if the situation is back to normal. While preparing the business community to respond to such risks, one needs to closely see the fraud, bribery, and corruption risks within the trade processes and documentation provisions. The fraud losses could cost organizations more in the long run. Past instances show that seemingly small supply chain frauds will go on while controls are weakened and can grow to a significant amount of losses over time. A majority of supply chain fraud cases involve unlawful behavior of indoor sources and frequent involvement or collusion with a third party. Such practices stem from the current supply shortages, reduced morale of labor, weak supervision, sluggish approval processes and low economic productivity. Therefore, supply Chain fraud requires a deeper understanding of the flow of goods, information and money along with the documentation processes. The transfer of cost, liability and responsibility of each stakeholder along the chain needs to be worked out carefully. Only a very effective digitized and automated system can help overcome this problem. Some measures like inspection of all connections of the supply chain including suppliers, subcontractors, dealers, distribution companies, agents, and brokers alongside regular risk assessment could help to check the fraud. Without internal assistance, supply chain theft often fails. Therefore, it is important to manage the risk posed by the low morale of staff of companies involved in trade and transportation. There needs to be a good level of cooperation with the sourcing and management teams to identify the threats and find ways to eliminate them. There are some techniques such as the temporary fraud risk assessment to identify weaknesses in the existing control framework and seek ways to strengthen the controls. Similarly, understanding the vendor risk management (VRM) plans, vendors' honesty and accountability are also some factors to be considered in this regard. To reduce the risk of supply chain fraud, it is a must to check the end-to-end supplier network to ensure that the company's supply chain stays intact. This can be possible only with an integrated tracking and tracing automated digitalization system. Leveraging digitalization to optimize and reduce costs while improving processes and customer service has become necessary. It has become important to work closely with national logistic service providers and enable them full control over supply chain activities and hold them liable with legal provisions based on international best practices. Equally important is to be able to settle disputes within the country as per the legal arrangements rather than taking disputes across borders. The author is a logistics expert and a consultant