Most common among the products with a comparative advantage in the hilly and mountain areas, which have seen rapid development in several areas, are the new niche-based products

Nepalese economy traditionally has been dominated by subsistence agriculture and meets cash needs from other sources of income. Over the years the above scenario has been seen due to two trends.

Firstly, adoption of ecologically and economically non-viable farming options- use of marginal/fragile lands and forest areas to meet the growing demand of food to feed its’ population, and secondly raised expectations of the people due to improvements in transportation and communication access to other better areas, lifestyles etc.

A shift from subsistence based economic activities to income-oriented business demands a market which in turn necessitates bearing the market related risks on the part of producers despite other risks and uncertainties.

Risk bearing function of the producers becomes an essential element in any diversification of economic activities from that of subsistence agriculture.

Thus enterprise is used to mean a production unit, product and the risk-bearing function.

But in the hilly and mountain areas of Nepal, the risk absorbing capacity of entrepreneurs is limited by the small scale of resource base, inaccessibility to markets, and the limited scope for the diversification of economic activities as they are small, scattered with often fragile resource base.

Proper and careful selection of an enterprise may reduce risk. It is a very critical task because of inaccessibility, thin spread of resources and materials, lack of forward and backward linkages and lack of infrastructure and services for commercial production.

Similarly the availability of foodstuff either within the area or from outside supply is a very important precondition for the promotion of promising agriculture related enterprise.

Basically the stages of agriculture development and products depend on own use for household needs, exchange under the traditional system of barter and for sale in the market for cash requirements.

The degree of enterprise diversification in the area depends upon the level of resource base and accessibility.

Generally livestock-based enterprises like draft power and manure, milk, milk products, meat, wool that are suitable for minimum transport, communication, market channels possess low marketing risk whereas enterprises based on diversified farming like fruits, vegetables, cash crops, plantation crops pose greater marketing risk and require more marketing information which are imperfect and involve wider markets and unpredictable fluctuations.

The value addition by processing and manufacturing enterprises consist of mere growing, extracting, and collection of material with very little processing and the income is a bare minimum.

If the area is well connected by transport, communication, access to technologies the markets improve; and processing takes place locally and the income derived from the processed output increases significantly.

In addition, such development reduces the risk of loss in transit like fruits, vegetables, milk etc.

Many hilly and mountain areas of Nepal have activities and enterprises based on traditional skills that co-exist. They are mostly, but not always, based on local raw materials, cultural traditions, and past reputations for example handicrafts, special woolen products, metal crafts and cultural artifacts.

The enterprises in hilly and mountain areas are generally underdeveloped with a wide variety of goods and services primarily to cater to the subsistence needs of the local people.

Most common among the products with a comparative advantage in the hilly and mountain areas, which have seen rapid development in several areas, are the new niche-based products, for example organic apples of Jumla, fresh vegetable of Guranse Surkhet and Kapurkot Salyan, Akabare chilli of eastern Nepal, and snowball cauliflower seed of Dolpa.

Shifting from subsistence to market orientation needs to consider agriculture, livestock and natural resource base as most of the households possess some resources and skill in these sectors.

But at the same time shifting should be managed through assuring food security either subsidized or as loan.

Above all market and transport are the two prerequisite conditions for pushing enterprises in the hilly and mountain areas.

It is seen that training and exposure to products and market for a few enterprising persons have pushed the development of this sector where the prerequisites are met already.

Because of marketing constraints chances of new enterprises coming are less. Marketing arrangements vary with products and place and the common practices are directly to consumers, through middlemen and wholesalers.

Prior production purchase order of the product is very rare. Organized market promotion and marketing are essential for products of small enterprises.

Therefore, producers based marketing organizations have greater chances of success insofar as they can prevent buyers from playing small producers off against each other, thus improving terms of trade and also pooling resources for market promotion.

Access to markets, technology, energy, credit and training and mechanism for minimization of market related risks are the important factors restricting enterprise development in the hills and mountains.

Bhandari is working as a senior market developer for Nepal Agricultural Market Development Programme.