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 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%; Agriculture sector 40%; Commercial sector 10%; Commercial sector 10%; Industry sector 10% out of which, Small and Cottage Industries are Industry sector 10% out of which, Small and Cottage Industries 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: 50% Value addition contribution by Small and Cottage Industries: 50% Service sector and others 40% 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 SNCategoryNumber 1Agro and Forest Based1313 2Construction5008 3Energy Based880 4Manufacturing Minerals169 5Service Tourism2192 Total71682

Number of Large Scale Industry Register by Category (Up to F.Y ) CategoryNo. of Industry Total Project Cost (Rs in Million) Total Fixed Cost (Rs in Million) Total Number of Employment Agro and Forest Based Construction Energy Based Manufacturing Minerals Service Tourism Total 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 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