National Workshop on National Workshop on Sub-national Innovation Systems and Sub-national Innovation Systems and

Technology Capacity Building Policies to Technology Capacity Building Policies to Enhance Competitiveness of SMEsEnhance Competitiveness of SMEs

(27-30 October 2006)(27-30 October 2006)ChinaChina

OrganizedOrganized by byUNESCAPUNESCAP

Bangkok, ThailandBangkok, Thailand

SMEs In Nepal, SMEs In Nepal, It’s innovation Strategies It’s innovation Strategies

Presented byPresented byMaheshwor Sharma PaudelMaheshwor Sharma Paudel

Director GeneralDirector GeneralGovernment of NepalGovernment of Nepal

Department of Cottage & Small IndustriesDepartment of Cottage & Small IndustriesKathmandu.Kathmandu.

27-30 October 200627-30 October 2006

Lumbini The Birth Place of Lord BuddhaLumbini The Birth Place of Lord Buddha

GeographicGeographic SituationSituation

Nepal Lies between two big countries Nepal Lies between two big countries ChinaChina and and IndiaIndia

It is a land locked CountryIt is a land locked Country Total land area is 1,47,181 sq km. Total land area is 1,47,181 sq km.

0.3% of the total land of Asia 0.3% of the total land of Asia 0.03% of the total area0.03% of the total area of the Earth. of the Earth.

Divided into three zonesDivided into three zones Snow Capped High Himalayas, 15% of total area Snow Capped High Himalayas, 15% of total area Mountainous region including long terraces & fertile valleys, 68%Mountainous region including long terraces & fertile valleys, 68% Sub-tropical plain Region 17%Sub-tropical plain Region 17% Land elevation from 70 mt. to 8848 mt form sea level, Land elevation from 70 mt. to 8848 mt form sea level, Highest Mountain Mt, EVEREST and other 8 highest peaks are in Highest Mountain Mt, EVEREST and other 8 highest peaks are in

Nepal Nepal Lumbini, the birth place of Lord Buddha is in Nepal.Lumbini, the birth place of Lord Buddha is in Nepal.

EconomicEconomic SituationSituation Population :Population : 26 million26 million Population Growth rate:Population Growth rate: 2.2% per annum. 2.2% per annum. The composition of Nepalese economy:The composition of Nepalese economy:

Agriculture sector 40%;Agriculture sector 40%; Commercial sector 10%;Commercial sector 10%; Industry sector 10% out of which, Small and Cottage Industries Industry sector 10% out of which, Small and Cottage Industries

are are nearly 90% .nearly 90% . Employment contribution by cottage and small industries : 76%Employment contribution by cottage and small industries : 76% Value addition contribution by Small and Cottage Industries: Value addition contribution by Small and Cottage Industries:

50%50% Service sector and others 40% Service sector and others 40%

Literacy of population:Literacy of population: 62% 62% Potential recourse is hydroelectricity, total capacity is Potential recourse is hydroelectricity, total capacity is

83,000 megawatt. 83,000 megawatt.

Current Status of SMEs in NepalCurrent Status of SMEs in Nepal

SN Category Number

1 Agro and Forest Based 1313

2 Construction 5008

3 Energy Based 880

4 Manufacturing 43427

5 Minerals 169

5 Service 18693

6 Tourism 2192

Total 71682

Number of Large Scale Industry Register by Number of Large Scale Industry Register by Category (Up to F.Y. 2005-06)Category (Up to F.Y. 2005-06)

Category No. of IndustryTotal Project

Cost (Rs in Million)

Total Fixed Cost (Rs in Million)

Total Number of Employment

Agro and Forest Based

159 9910.54 8413.2 24787

Construction 25 639.46 427.87 1700

Energy Based 30 27564.66 25607.15 6327

Manufacturing 1753 104477.5 71379.59 216300

Minerals 3 292.66 230.04 197

Service 823 52816.97 42824.6 65121

Tourism 509 29353.88 25792.61 24233

Total 3302 225055.7 174675.1 338665

Note: 1$(US)=74 RS (Nepalese Rupee)

Capacity Building of SMEs in NepalCapacity Building of SMEs in Nepal

Policy SupportPolicy Support

Industrial policy 1992 and industrial Enterprises Act Industrial policy 1992 and industrial Enterprises Act 1992 gave priority and provided tax incentives to 1992 gave priority and provided tax incentives to SMEs.SMEs.

Role of Government determined as regulator, facilitator Role of Government determined as regulator, facilitator and monitorand monitor

Private-Sector EncouragedPrivate-Sector Encouraged Foreign Investment & Technology Transfer Act 1992 Foreign Investment & Technology Transfer Act 1992

implemented 100 percent foreign investment opened implemented 100 percent foreign investment opened for industry except traditional cottage industry and for industry except traditional cottage industry and security-concerned Industry. security-concerned Industry.

IT Policy 2002 opened the door for IT and ICT to IT Policy 2002 opened the door for IT and ICT to foreign-Investor tooforeign-Investor too

Institutional Support.Institutional Support. Dept of Cottage and Small Industry (DoCSI) provides Dept of Cottage and Small Industry (DoCSI) provides

Various training to entrepreneursVarious training to entrepreneurs Institute of Entrepreneurship and Institutional Institute of Entrepreneurship and Institutional

Development (IEDI) established. Development (IEDI) established. Industrial Estate (ten) are in operation to support Industrial Estate (ten) are in operation to support

industries.industries. Micro Credit fund and fund for cottage and small Micro Credit fund and fund for cottage and small

industry created. industry created. Many Bank and Financial Institutions established Many Bank and Financial Institutions established

and started financial support.and started financial support.

Institutional Support cont….Institutional Support cont….

Butwal Technical Institute Provides Butwal Technical Institute Provides apprenticeship-oriented training for many yearsapprenticeship-oriented training for many years

IT park-established IT park-established More than 1000 IT and ICT institutions are More than 1000 IT and ICT institutions are

producing IT, ICT experts. producing IT, ICT experts. One window-Committee provides incentives to the One window-Committee provides incentives to the

industries. industries. Industrial-Promotion Board looks on every Industrial-Promotion Board looks on every

problem of industry. problem of industry. In this year, government with privates sector In this year, government with privates sector

partnership established the fund of 2000 Million Rs partnership established the fund of 2000 Million Rs (28.3 m US$) particularly to revive sick industries (28.3 m US$) particularly to revive sick industries

Challenges and Problem SMEsChallenges and Problem SMEs

Due to liberalization and globalization, SMEs have Due to liberalization and globalization, SMEs have to face global competition.to face global competition.

Large-Industries of Mass production are in Large-Industries of Mass production are in neighboring countries China and India. It is neighboring countries China and India. It is difficult to compete with them. difficult to compete with them.

Nepal is suffering by insurgency for 12 years, it Nepal is suffering by insurgency for 12 years, it has deeply has deeply stricken stricken to all the economic activities. to all the economic activities.

Challenges and Problem SMEs Challenges and Problem SMEs cont..cont..

Nepal being a least developed country, There is difficulty of technology skilled manpower, financial resources etc.

Infrastructures of development are poor such as electricity-power, transportation facility are not sufficient.

Capacity of entrepreneur's is low. They can not develop relationship in international sectors. They are confined within boarder.

Political Instability has created crisis of confidence in policy regime

Opportunity for SMEsOpportunity for SMEs

Due to globalization and liberalization the world in Due to globalization and liberalization the world in open, SMEs can take help according to their choice. open, SMEs can take help according to their choice. They can enter the global-market.They can enter the global-market.

There is great chance for developing countries to There is great chance for developing countries to adopt new technology from developed countries with adopt new technology from developed countries with appropriate means of technology transfer. appropriate means of technology transfer.

Nepal become member of WTO, SMEs can be Nepal become member of WTO, SMEs can be benefited by WTO regime.benefited by WTO regime.

Foreign-investment is open and there are many Foreign-investment is open and there are many incentives in technology-transfer. incentives in technology-transfer.

Government is playing a role of catalyst for private-Government is playing a role of catalyst for private-sector. All the areas except security-sector are open sector. All the areas except security-sector are open for private sector. for private sector.

Bank and financial companies are many. They are Bank and financial companies are many. They are searching the areas of investment. searching the areas of investment.

Opportunity for SMEs cont…Opportunity for SMEs cont…

There is rapid growth of telecom, IT and ICT There is rapid growth of telecom, IT and ICT sector. sector.

The natural scene of the country is incomparable. The natural scene of the country is incomparable. 1000 km long Himalaya-range, 8 highest peaks of 1000 km long Himalaya-range, 8 highest peaks of the world including the Mt. Everest are in Nepal the world including the Mt. Everest are in Nepal

The topographical mismatch is there. The topographical mismatch is there. Lumbini the birth place of Lord Sidhartha Gautam, Lumbini the birth place of Lord Sidhartha Gautam,

Buddhism-holistic place of the world is in Nepal. Buddhism-holistic place of the world is in Nepal. Tourism Sector can flourish here.Tourism Sector can flourish here. Life saving natural herbs such as yarshabgumga Life saving natural herbs such as yarshabgumga

(Cordyceps Sinensis), Pachamle(five-finger) etc (Cordyceps Sinensis), Pachamle(five-finger) etc are the products of high mountain area. are the products of high mountain area.

Areas of ImprovementAreas of Improvement

Solution of insurgency and political stabilitySolution of insurgency and political stability Policy-stability and create confidence in investorPolicy-stability and create confidence in investor Adopt appropriate technology and use of IT and Adopt appropriate technology and use of IT and

ICT.ICT. Focus on institutional-development such as IT Focus on institutional-development such as IT

parks, Institutes of Technology, Technical Schools.parks, Institutes of Technology, Technical Schools. Provide infrastructure such as electricity Provide infrastructure such as electricity

transportation, telecom etc.transportation, telecom etc. Financial support, Create Venture Capital Fund. Financial support, Create Venture Capital Fund. Strengthen Marketing Network inside and out side Strengthen Marketing Network inside and out side

of the country. of the country. Development R&D aspects. Development R&D aspects. Incentives need to be provide for R&D. Incentives need to be provide for R&D.

Areas of ImprovementAreas of Improvement Effort should be focused to develop business Effort should be focused to develop business

incubation centers in coordinated way by various incubation centers in coordinated way by various sectors such as-management colleges universities IT sectors such as-management colleges universities IT and ICT- institutions.and ICT- institutions.

To enhance Business Development Service To enhance Business Development Service networking and Co-ordination in various agencies is networking and Co-ordination in various agencies is necessary. necessary.

Provide financial support to small and young Provide financial support to small and young enterprises. enterprises.

More efforts should be done to attract the Foreign-More efforts should be done to attract the Foreign-Direct-Investment (FDI )creating favorable Direct-Investment (FDI )creating favorable environment. environment.

The role of private sector is vital for the development. The role of private sector is vital for the development. So it is necessary to make the environment of So it is necessary to make the environment of confidency and to facilitate the private sector. confidency and to facilitate the private sector.

ConclusionConclusion

Least developed countries are facing various Least developed countries are facing various problems. To get out from the vicious circle of problems. To get out from the vicious circle of poverty, they have to be innovative and use new poverty, they have to be innovative and use new methods and technology for the development. methods and technology for the development. The role of SMEs is very important in these The role of SMEs is very important in these countries because they are the major part of countries because they are the major part of economy. So it is important to build the capacity economy. So it is important to build the capacity of SMEs by adopting new IT and ICT techniques of SMEs by adopting new IT and ICT techniques and by technology transfer. and by technology transfer.

Thank youThank you