The Current Industrial Policy of the Government of Nepal

Industrial Policy of the Government

The tenth plan had set the goal and objectives of increasing the contribution of industry to the Gross Domestic Product (GDP), through an increase and expansion in industrial production by encouraging and promoting the private sector to help to reduce the poverty by increasing the income and purchasing power of rural people by creating the opportunities of employment and self employment through cottage industry and micro enterprises. The plan had set the goal of attracting more Foreign Direct Investment (FDI) and appropriate technology in areas with comparative advantage in order to increase the industrial competitiveness.

During the tenth plan period, there had been negative impact on the pace of industrialization due to the deteriorating law and order condition, inadequate institutional strengthening and lack of effectiveness in service delivery. As a result, the growth of only 1.9% could be achieved against the set target of 7.8% growth rate. In the same way, the contribution of manufacturing and mining to the GDP was only 8.1% against the target of 9.3%.

Small enterprises operating with locally available raw materials, owning technology and small capital investment, have significantly contributed to economic and social upliftment at the local level. It seems that the role of such enterprises can be vital in improving the living standard of the extremely deprived groups, women, Dalits, Adivasi Janajati, and the backward communities. In addition, these are expected to contribute to poverty alleviation by increasing self-reliance with the creation of opportunities for self-employment and employment.

Problems, Challenges and Opportunities

Opportunities and Strengths

1. Likelihood of sustainable peace and political stability as a result of a historic agreement at the highest political level.
2. Policy to open north-south highways.
3. Membership in multi-lateral regional and bi-lateral trade arrangements like WTO, BIMSTEC/SAFTA.
4. Expansion of information technology.
5. High economic growth rate and rapid industrialization in neighbouring countries with increasing possibility of foreign investment.

Long term vision: The vision of this sector is to create an industrial climate with the capacity to compete in the global economy ensuring a high and sustainable growth rate.

Objectives

1. To create a strong industrial environment by developing industrial policy and institutional structures.
2. To support poverty alleviation by putting emphasis on social inclusion through micro, cottage and small industries.
3. To increase the contribution of industrial sector to the national income by increasing industrial production in partnership with the private sector.
4. To develop Nepal as a safe, attractive and environment-friendly destination for investments.

Quantitative Targets

1. To achieve 6.3% average annual industrial growth rate.
2. To ensure investment of Rs. 47 billion during the plan period with annual domestic investment of Rs. 12 billion and foreign investment of Rs. 3.5 billion.
3. To create 150,000 additional jobs in the industry sector (50,000 in big industries and 100,000 in micro, cottage and small industries).

Strategies

1. To revise policies and acts in order to manage the industrial competition in the context of globalization.
2. To develop and extend industrial infrastructure with participation of private and foreign investment and to strengthen the management for the protection of industrial property.
3. To simplify the processes related to the establishment, operation and exit of industries.
4. To establish “one stop service center” in order to provide physical infrastructure and other services in a convenient manner.
5. To make the selection mechanism effective in order to ensure the participation of women, Dalit, Adivasi Janajati, the poor and backward groups and those affected by the conflict, in trainings related with micro, cottage and small industries, and to be conducted in different districts.
6. To promote micro, small and traditional cottage industries, which have the involvement of the marginalized and socially dejected groups, and Dalit, women, Madhesi, Muslim, Adibasi Janajati, and people with disability.
7. To run capacity enhancement programs in order to provide assistance to the development of micro, cottage, small and traditional industries.
8. To campaign like, “Be Entrepreneur, Reduce Youth Unemployment” and “One Village One Production” for employment generation.
9. To make government play the role of a facilitator, coordinator, promoter and monitor, while ensuring maximum participation of the private sector in the industrial development of the country.
10. To identify sectors and products of comparative and competitive advantages.
11. To attract internal and foreign investments by establishing special economic zones in feasible places for export oriented industries.
12. To promote industrial investment through the development of the capital market.
13. To create a conductive investment climate in order to increase investment in import substituting industries by utilizing local resources.
14. To create an environment facilitating the entry of foreign investment, including that of Non Resident Nepalese (NRNs), in a comprehensive way.
15. To help dynamic industrial development by enhancing industrial linkages, and to promote investment by identifying high priority industries.
16. To promote and facilitate an environment-friendly concepts for sustainable industrialization.

Policy and Working Policies

1. Necessary policy framework will be established for making the establishment, management and operation of micro, cottage and small industries in simple, convenient and organized way, along with the ensuring compatibility, clarity and coordination in policy and legal provisions developed by agencies associated to the industrial sector.
2. Industrial zones and industrial business clusters will be established based on a land use plan prepared with coordination of local bodies.
3. A provision will be made for allowing the registration of industries with fixed capital of upto NRs. 10 million and based on domestic raw materials and with no adverse impact on national security, public health, and environment at the local bodies.
4. The competition with the imported goods will be managed through custom duties, anti-dumping duty and equalizing/countervailing duty and using the competition provisions.
5. Appropriate facilities and incentives will be provided to attract national and foreign investment in the developer and expansion of industrial infrastructure and structure. With the protection and promotion of the private sector investment, such protection will be ensured.
6. The process for merger of two or more industries, one industry taking over of another and the establishment of branches will be made simple and convenient.
7. The appropriate industries with capital and managerial capacity will be allowed to take in lease and operate sick industries that are not operating at a full capacity.
8. With the system of the production and distribution of industrial goods, the protection of industrial property and its utilization will be promoted.
9. Institutional capacity will be developed for the raising of awareness on intellectual property rights and its effective protection. New appropriate arrangements will be made to make the regulation and implementation aspects simpler and effective by linking it with the international convention and treaties related with Intellectual Property Rights (IPRs).
10. The Board of Investment with participation of stakeholders will be appropriately structured to facilitate industrial and investment promotion.
11. Industrial exit will be made simpler and easy.
12. Selection mechanisms with the involvement of NGOs working on the related field and local bodies, will be made effective in order to ensure inclusion in the programs targeted for poverty alleviation.
13. Micro enterprises development programs will be implemented in all districts.
14. The development of industrial business clusters will be promoted in order to facilitate the creation, promotion and development of micro enterprises.
15. Programs related to micro, cottage and small industries will be implemented by targeting the extremely deprived and socially excluded groups, and those below the poverty line, selected from the designated rural communities.
16. Incubation services will be established and developed with initiatives and investment of the private sector fore entreprenurial development by orienting the youth and the emerging entrepreneurs to use their innovative talents in industry and commerce.
17. Additional facilities and incentives will be provided on the basis of the number of direct employment made available.
18. Industries will be encouraged to be competitive at the international level from the perspective of the production cost and quality and also to increase productivity.
19. Emphasis will be given to industries based on the local availability of raw materials, traditional skills and geographical specialities.
20. Facilities and incentives will be provided to investments considering those being provided by neighbouring countries and other competitive countries and economies.
21. In case of any industry making parts and inputs on sub-contracting in collaboration with other industries, all the facilities and incentives will be made available to it.
22. Provisions will be made to allow contract manufacturing by using the original trade mark.
23. Venture Capital Fund will be established in order to help new enterprises and investment in the form of equity and to encourage them.
24. Provision will be made to encourage local bodies in order to promote industrial investment in their territory.
25. A profile of available raw materials in the district and feasible industries will be made. Priority will be given to the promotion of such industries.
26. Opportunities will be provided to attract international oil companies for the exploration of petroleum in feasible locations.
27. Efforts to mobilize national and international support in the exploration of petroleum by using the current act, rules, technical data, posters and graphics related to petroleum will be made.
28. With the participation of the private sector, extensive search of resources located in different parts of the country will be done. On the basis of feasibility, industries based on minerals will be established.
29. Efforts to facilitate the entrance of foreign investment and technology in the areas of comparative advantage and priority sectors will be made by creating an investment friendly environment.
30. Effective quality determination, certification and proper measurement standards will be ensured for the protection of the interests of industry and consumers.
31. The concept of a working system of cleaner production technology and green productivity will be adopted.