This note looks at the services sectorand its dual role for Nepal: as a direct source of exports,and as a provider of key inputs for other sectors of theeconomy. It identifies sources of potential for servicesexports, and key obstacles for improved efficiency in thesector. It also provides some policy recommendations toalleviate the observed obstacles, and presents examples ofgood practices from across the world in terms of servicestrade performance and reforms. Three of the 12 sectorsidentified in Nepal’s National Trade Integration Strategy2015 (NTIS 2015) are services-related. This note assessesNepal’s trade potential in services, and identifiesactionable policy measures that are needed for Nepal toachieve this potential. The framework used to assess Nepal’strade potential in services starts from the idea thatservices play a dual role for building exportcompetitiveness in the Nepalese economy. The remainder ofthis note proceeds as follows. Section I analyzes the directservices export performance of Nepal’s exports relative tocomparator countries, when measuring exports in gross orvalue added terms. It takes a detailed look at performanceof Nepal’s priority export potential services sectors.Section II analyzes the indirect services exportperformance, when services are used as inputs for othersectors’ exports. It takes a perspective of services forcross-cutting export competitiveness. This analysis isundertaken in value-added terms. Section III details thepolicy implications that arise from this analysis, takingboth a cross-cutting and sector-specific point of view.