Nepal | July 04, 2020

Micro, small and medium enterprises boom

Himalayan News Service
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Kathmandu, October 1

Many international investors may have shunned potential projects in the country due to the unfavourable business environment, but official data show cottage, small and medium enterprises have boomed in the last one decade.

The number of cottage, small and medium enterprises surged by a whopping 360.89 per cent to 320,000 by the end of last fiscal 2015-16, compared to 69,431 a decade back (fiscal 2005-06), according to the Department of Cottage and Small Industries (DoCSI).

The government’s effort to develop enterprises in the country through various policy interventions, the increasing number of returnee migrants with necessary skills and capital have been considered as the major cause for rapid growth of cottage, small and medium enterprises. Support extended by some big industries and corporate houses for the development of such enterprises have also fuelled the boom, say officials.

Cottage and Small Industry Offices (CSIOs), under DCSI, register firms having fixed capital worth Rs 100,000 to Rs 30 million in each district. As per DCSI, 80 per cent of the industries registered in the DCSI have fixed capital ranging between Rs 300,000 to Rs 600,000.

“The government has been offering various incentives to cottage and small industries. For example, the fiscal budget of this year has increased the allocation for the Women Entrepreneurship Fund from Rs 60 million to Rs 180 million,” said Narayan Prasad Bidari, director general of DCSI, noting that such enterprises are critical for inclusive and sustainable economic growth.

The recent trend of corporate houses offering support for development of small and medium enterprises has also helped the sector to dodge the general trend of sluggish growth. In December 2012, Chaudhary Foundation (CF) — a philanthropic arm of prominent corporate house Chaudhary Group — had signed a memorandum of understanding with Yunus Centre — an organisation promoted by Nobel Laureate Muhammad Yunus — to support the people of remote Nepal in enterprises development.

CF, with support of Lions Club International, started working in the far-western region of the country. CF has been branding its enterprises development initiative as ‘social business’ which means businesses without profit and without owners. The profit from the business is reinvested to set up new industries to create more enterprises and more jobs in the rural parts of the country.

Likewise, Surya Nepal — another corporate house — has supported the locals of Mulpani, Kathmandu to set up potato chips factory.

A closer look at seemingly positive scenario of cottage, small and medium enterprises, however, reveals that their contribution to the gross domestic product (GDP) has not increased significantly.

As per Shyam Prasad Giri, president of Federation of Nepal Cottage and Small Industries (FNCSI), the reason for this is because numerous cottage, small and medium enterprises were registered simply to take benefit of the incentives provided by the government. “Moreover, many projects run by non-government organisations and international non-government organisations are shut down after the term of such projects concludes. Similarly, many register enterprises for the purpose of applying for a visa to a foreign country as a businessman.”

As per FNCSI, licence of only around 200,000 cottage and small medium enterprises are renewed upon expiry.

Nonetheless, government officials are upbeat about the potential of cottage, small and medium enterprises.

Yam Kumari Khatiwada, joint secretary at the Industrial Promotion Division under the Ministry of Industry, opined the government should introduce programmes that would encourage such small production-based enterprises to integrate with big-scale enterprises. “There is scope to even expand beyond the country, like neighbouring India, through already existing agreements like Nepal-India trade treaty, which has extended preferential relief in duty for products manufactured by small scale industries in Nepal.

A version of this article appears in print on October 02, 2016 of The Himalayan Times.

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