National Workshop on

Sub-national Innovation Systems and

Technology Capacity Building Policies to
Enhance Competitiveness of SMEs
(27-30 October 2006)
China

Organized by
UNESCAP
Bangkok, Thailand
 SMEs In Nepal,
It’s innovation Strategies

Presented by
Maheshwor Sharma Paudel
Director General
Government of Nepal
Department of Cottage & Small Industries
Kathmandu.
27-30 October 2006
Lumbini The Birth Place of Lord Buddha
Geographic Situation
 Nepal Lies between two big countries China and
India
 It is a land locked Country
 Total land area is 1,47,181 sq km.

0.3% of the total land of Asia

0.03% of the total area of the Earth.

 Divided into three zones

 Snow Capped High Himalayas, 15% of total area
 Mountainous region including long terraces & fertile valleys, 68%
 Sub-tropical plain Region 17%
 Land elevation from 70 mt. to 8848 mt form sea level,
 Highest Mountain Mt, EVEREST and other 8 highest peaks are in Nepal
 Lumbini, the birth place of Lord Buddha is in Nepal.
 Economic Situation
 Population : 26 million
 Population Growth rate: 2.2% per annum.
 The composition of Nepalese economy:
 Agriculture sector 40%;
 Commercial sector 10%;
 Industry sector 10% out of which, Small and Cottage Industries are
nearly 90% .
 Employment contribution by cottage and small industries : 76%
 Value addition contribution by Small and Cottage Industries: 50%
 Service sector and others 40%
 Literacy of population: 62%
 Potential recourse is hydroelectricity, total capacity is
83,000 megawatt.
 Current 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
Category (Up to F.Y. 2005-06)

Total Project
Total Fixed Cost Total Number of
Category No. of Industry Cost
(Rs in Million) Employment
(Rs in Million)

Agro and Forest

159 9910.54 8413.2 24787
Based

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 Nepal

Policy Support
 Industrial policy 1992 and industrial Enterprises Act
1992 gave priority and provided tax incentives to
SMEs.
 Role of Government determined as regulator, facilitator
and monitor
 Private-Sector Encouraged
 Foreign Investment & Technology Transfer Act 1992
implemented 100 percent foreign investment opened
for industry except traditional cottage industry and
security-concerned Industry.
 IT Policy 2002 opened the door for IT and ICT to
foreign-Investor too
 Institutional Support.
 Dept of Cottage and Small Industry (DoCSI) provides
Various training to entrepreneurs
 Institute of Entrepreneurship and Institutional
Development (IEDI) established.
 Industrial Estate (ten) are in operation to support
industries.
 Micro Credit fund and fund for cottage and small
industry created.
 Many Bank and Financial Institutions established
and started financial support.
 Institutional Support cont….

 Butwal Technical Institute Provides apprenticeship-

oriented training for many years
 IT park-established
 More than 1000 IT and ICT institutions are
producing IT, ICT experts.
 One window-Committee provides incentives to the
industries.
 Industrial-Promotion Board looks on every problem
of industry.
 In this year, government with privates sector
partnership established the fund of 2000 Million Rs
(28.3 m US$) particularly to revive sick industries
 Challenges and Problem SMEs

 Due to liberalization and globalization, SMEs have

to face global competition.
 Large-Industries of Mass production are in
neighboring countries China and India. It is
difficult to compete with them.
 Nepal is suffering by insurgency for 12 years, it
has deeply stricken to all the economic activities.
 Challenges and Problem SMEs
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 SMEs
 Due to globalization and liberalization the world in
open, SMEs can take help according to their choice.
They can enter the global-market.
 There is great chance for developing countries to
adopt new technology from developed countries with
appropriate means of technology transfer.
 Nepal become member of WTO, SMEs can be
benefited by WTO regime.
 Foreign-investment is open and there are many
incentives in technology-transfer.
 Government is playing a role of catalyst for private-
sector. All the areas except security-sector are open
for private sector.
 Bank and financial companies are many. They are
searching the areas of investment.
 Opportunity for SMEs cont…
 There is rapid growth of telecom, IT and ICT
sector.
 The natural scene of the country is incomparable.
1000 km long Himalaya-range, 8 highest peaks of
the world including the Mt. Everest are in Nepal
 The topographical mismatch is there.
 Lumbini the birth place of Lord Sidhartha Gautam,
Buddhism-holistic place of the world is in Nepal.
 Tourism Sector can flourish here.
 Life saving natural herbs such as yarshabgumga
(Cordyceps Sinensis), Pachamle(five-finger) etc
are the products of high mountain area.
 Areas of Improvement
 Solution of insurgency and political stability
 Policy-stability and create confidence in investor
 Adopt appropriate technology and use of IT and
ICT.
 Focus on institutional-development such as IT
parks, Institutes of Technology, Technical Schools.
 Provide infrastructure such as electricity
transportation, telecom etc.
 Financial support, Create Venture Capital Fund.
 Strengthen Marketing Network inside and out side
of the country.
 Development R&D aspects.
 Incentives need to be provide for R&D.
 Areas of Improvement
 Effort should be focused to develop business
incubation centers in coordinated way by various
sectors such as-management colleges universities IT
and ICT- institutions.
 To enhance Business Development Service
networking and Co-ordination in various agencies is
necessary.
 Provide financial support to small and young
enterprises.
 More efforts should be done to attract the Foreign-
Direct-Investment (FDI )creating favorable
environment.
 The role of private sector is vital for the development.
So it is necessary to make the environment of
confidency and to facilitate the private sector.
 Conclusion
Least developed countries are facing various
problems. To get out from the vicious circle of
poverty, they have to be innovative and use new
methods and technology for the development.
The role of SMEs is very important in these
countries because they are the major part of
economy. So it is important to build the capacity
of SMEs by adopting new IT and ICT techniques
and by technology transfer.
Thank you