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Submitted by:
Avinash Hada
MBA FALL 2015
Submitted to:
Mr. Gokarna Awasthi
10th July, 2017
Agriculture
Production, Import and Export, Current Status
Agriculture has been the major economic backbone of the country. Despite the innovation in
science and technology, impact on agriculture in the economy has been less than that of industry
and services but the volume of agricultural production is being significantly increasing year to
year over the period of time. Agriculture has contributed around 28.9% of the total economy in
the fiscal year 2073/74 as compared to 31.1% in the last fiscal year 2072/73. About 2/3rd of
population has been involved in agriculture profession. Because agriculture is fully dependent
upon the season and rainfalls, there has been no any satisfactory development in the increment of
agriculture sector in the last 10 years.
Comparing the production total food production of Nepal (rice, maize, millet, wheat, barley,
buckwheat) between the fiscal year 2072/73 and fiscal year 2073/74, there has been increase in
about 13% and the total production has been estimated to around 97, 41,000 metric tons. The
production in the last fiscal year 2072/73 was only 86, 14,000 metric tons.
Paddy is the major food crop among all food crops in Nepal. As per preliminary estimate, paddy
production is expected to increase by 21.6% (52 lakhs 30 thousand metric tons) compared to
fiscal year 2072/73 (42 lakhs 99 thousand metric tons). Maize is the 2nd most major crop of
Nepal which is expected to increase by 3.97% as compared to fiscal year 2072/73.
In fiscal year 2073/74, the total number of cattle in Nepal is expected to increase by 0.89 percent
as compared to that of previous year.
Nepals cereal and livestock export are expected to increase by 28.8 percent. For alcoholic
products the exports are expected to decrease by 51.04 percent (17 crores).
For agriculture and livestock sector programs Rs. 30.40 billion has been allocated. Agricultural
production will be enhanced through the proper distribution of factors of production by
identifying location-specific competitive and comparative advantageous products.
Agriculture is responsible for providing inputs of raw materials to develop industries.
Hence focus has been shifted towards increasing agricultural products and the campaign
named Prime Minister Agricultural Adhunikaran has been launched.
Various agricultural programs has been launched such as producing agricultural products
and to do this, agricultural products producing blocks will be established in each of the
district comprising of 100 hector land.
The provision of 5 percent subsidy in the interest of agriculture and livestock loan has
continued. Similarly, continuity to all the subsidies and facilities including the fertilizer
and improved seeds has also been continued. All sorts of subsidies provided to
agriculture will be managed through farmers' own bank account.
The presence of middle man will be discouraged in order to ensure the fair price and
market access of the products of the framers by establishing appropriate value chain.
Large scale cold store and storage centers will be constructed by Public, Private and
Cooperative sectors by maintaining provincial balance. Market access of farmers will be
increased by constructing infrastructure of agricultural product market.
Advanced breeding center will be established in potential places so as to increase the
production for the improvement cow breeding.
Agricultural and Livestock will be developed towards commercialization in order to
attract youth in agriculture sector.
Agricultural insurance service will be expanded throughout the country by integrating the
available insurance services at present.
Branding of Nepalese agricultural products will be initiated to export in the world market
by expanding the organic farming.
Opportunities
Suggestions
The contribution of manufacturing to GDP in fiscal year 2064/65 was 7.34 which have decreased
to 5.67 in current fiscal year 2073/2074. In fiscal year 2072/73 the contribution of manufacturing
industry to GDP decreased to 5.72 percent. The growth of this sector for the last ten year is
averaged at 2.05 percentages.
Growth of the manufacturing sector is estimated to increase by 9.7 percentages for the fiscal year
2073/74 comparing to its rate during the fiscal year 2072/73.
During the last fiscal year, the devastating earthquake and the unofficial border blockade was the
reason behind 8 percentage decline in this sector whereas, during this fiscal year, due to the
sufficient inflow of the petroleum, less obstruction from bands and the strikes created normalcy
in the industrial sector thereby resulting a increasing effects in the manufacturing sector.
In the first eight months of fiscal year 2073/74 altogether 6834 industries have been registered at
ministry of industrial department. In analyzing all industries manufacturing industries have the
highest number of industries with 2713 industries (39.7%), service industries number is 1907
(27.9%), tourism industry with total of 1406 (20.6%), agriculture industry with 413 numbers
(6.1%) and energy with 283 industries (4.1%).
In the first eight months of fiscal year 2073/74 industries that has been registered the highest
capital investment is in energy industries with 52.9%, manufacturing industry with 23.1%,
service industries with 10.7%, tourism industries with 8%, agriculture industries with 1.6% and
minerals with only 0.3%.
Because of the unfavorable working climate prevailed in the country, many of the workforce are
forced to leave the country for abroad employment. In these scenarios, establishment of industry
plays a huge role in creating positive working climate and ultimately positive economic growth.
For industry, commerce and supply sector programs Rs. 10.96 billion has been allocated. The
major highlights are:
Foreign Direct Investment (FDI) is one of the factors for growing trade, investment and
economic growth for the countries. The integration of global economies is enhanced by flow of
FDI across the globe. Multinational companies (MNCs) are the vehicle of FDI through which
they transfer capital and technologies from one geography to geography. Primarily, MNCs go
cross boarder operations with the view of market seeking, raw materials explorations and low
operations costs. MNCs are important for developing economies because they invest in the green
fields which help to improve the infrastructure of the economy. The main importance of FDI on
economic growth is that FDI are embedded with the new technologies which become the pivotal
driver for economic transformation of developing and under developed economies. The local
firms learn new technologies from the MNCs in one hand; they try to improve the managerial
and technological aspects of the operations on the other hand. In the recent years, every country
has the policy to attract more FDI in their economic policies. Nepals neighboring countries both
China and India have achieved higher economic growth rate along with the massive inflow of
FDI (table below). Not only India and China, other neighboring countries recorded higher level
of economic grow in the recent years.
Looking at the data of past 10 years, in fiscal year 2063/64 there were 188 firms operated with
FDI with NRS 3 arba 18 crores and 60 lakhs. In fiscal year 2071/72 there were 370 firms
operated with FDI which declined to 347 firms in fiscal year 2072/73. In the first 8 months of
fiscal year 2073/74 there are currently 213 firms operated with FDI with NRS 10 arba 15 crores
and 10 lakhs.
In the first 8 months of fiscal year 2073/74, there are around 3907 firms registered from 90
countries with FDI. These firms employ 224,286 employees. India has the highest share of FDI
with 39.12%, China is the second with 16.26% and China-Hongkong is the third with 13.06%.
The share of USA in FDI is 3.64% and UK is 2.56%.
In terms of number of industries operating in Nepal with FDI, China has the highest number of
industries with 1093 industries, India is second with 662 industries and third is USA with 344
industries.
Various laws have been enacted to develop the industries such FDI act 2071. Focus has been also
towards transfer of technologies and FDI.
According to the study done by World Bank in 2009 there are two main reasons:
1. The first reason is Political instability of Nepal. The frequent changes in government
have had severe impact on the development and formulation of industrial sector in the
country. In 26 years after declaration of democracy in the country, the present Sher
Bahadur Deuba led government is the 24th government of the country. This shows the
high level of political instability. The average life of government of Nepal since
declaration of democracy is hardly a year. So changing government and changing
priorities and policies along with political ideology is affecting industrial sector.
In addition to political instability, the trade union problem is another aspect that has
hindered the pace of industrial development. The trade unions are causing problems time
and again with unjustified demand related to wage and compensation. The Everest Hotel
is the recent example of such problems. Even though in surface massive earthquake
seems to be reason behind shutting of Everest Hotel but in reality labor union issues were
the major factor. Surya Nepal Pvt. Ltds Biratnagar based garment manufacturing unit
which ceased production due to problem of trade unions. The highly politicized unions
have caused organization huge cost in terms of strikes, inefficiency and disputes between
management and employees. Forced employment of party candidates by trade unions are
unlikely to improve productivity of manufacturing industries. Forced donations are other
problems caused by trade unions which add further to cost of doing business.
During the last fiscal year, the devastating earthquake and the unofficial border blockade
was the reason behind decline in this sector whereas, during this fiscal year, due to the
sufficient inflow of the petroleum, less obstruction from bands and the strikes created
normalcy in the industrial sector thereby resulting a increasing effects in the
manufacturing sector.
Unfavorable environment for foreign investment
Lack of proper infrastructure. For eg: State of Mugling- Naraygadh sadak
Huge competition from India and China
Lack of security and Manpower.
Opportunities
Current Status
Due to the lack of the information about the actual impact of tourism in total gdp has been
difficult to obtain. In the fiscal year 2072/73, the contribution of hotel and restaurant sector in
GDP is 2 percent whereas it is expected to be at 1.98 in the fiscal year 2073/2074. By 2025,
nation tourism project has set a vision with a target to bring 25 lakhs 21 thousand tourism and to
create an employment of 8 lakhs 98 thousand.
Looking at the statistics of last 10 years, in the year 2006 there was an inflow of 3,83,926 tourists
in the valley. Likewise in the year 2016, there were around inflow of 7,53,002 tourists arrival in
the country. The devastated earthquake of 2072,followed by the unofficial blockade in the border
of Nepal had created the negative impact in tourism activities in 2015 resulting in 32 percent
decrease in the tourist arrival during the same period. Thereafter, there is an improvement in the
tourist arrival. The number of tourist arrival during 2015 was 5,38,970 whereas it was increased
by 40 percent in 2016.
While analyzing the total number of tourist arrival by country during 2016,top five countries
with the largest number of tourist arrival have been India (15.7%), followed by china (13.8%),
Srilanka(7.6%), the USA(7%), and UK (6.1%).These tourist appeared to have contributed 50
percent of the total number of tourist arrival during this period. These figures during the same
period of earlier year were India (14%), china (12%), America (10%), Srilanka (8%) and
Thailand (6%).
In the year 2016, there was an inflow of 1,80,439 non-Indian tourists from the border area with
79% coming from Bhairawa-Sunauli border. Of the total number of tourist visiting Nepal during
2015 by purpose, 65% of them come for holiday/entertainment/travel purposes. In t his way, 11
percent of them came for the religious purposes, 8.83% for mountaineering/trekking purposes,
3.23 percent for trade, 2.83 percent for administrative or office trip, 1.7% for
meetings/conference and 7.4% for the other purposes.
Lumbini is regarded as the major tourist destination of Nepal. During 2015, a total of 7 lakhs 48
thousand 2 hundred 94 internal and external tourist had visited Lumbini. In 2016 the statistics
increased by 72% totaling 12 lakhs 85 thousand 6 hundred 80.Among these number the total of
10 lakhs 15 thousand 2 hundred 69 were Nepali, 1 lakhs 34 thousand 2 hundred 69 were Indians
while 1 lakhs 36 thousand 2 hundred 53 were from rest of the world.
Foreign exchange earnings from the tourism sector stood at Rs 41 billion 76 Crores 50 lakhs in
fiscal year 2072/2073.In the first eight months of the fiscal year 2073/74 foreign exchange
earnings from the tourism sector recorded at 36 billion 19 crores 90 lakhs. Such Earnings from
the tourism sector in the first eight months of the fiscal year 2073/74 stood at 66.8 percent of the
total foreign exchange earnings and 23.3% of foreign exchange earned from the exports of goods
of the total foreign exchange earned. In the fiscal year 2072/73 there were 3 casinos in operation
which rose to total of 5 during the first eight months of the fiscal year 2073/74.In this way, total
of 3 mini casinos and one online gambling are in operation.
The budget has allocated Rs. 13.72 billion for three airports: Nijgadh Second International
Airport, Gautam Buddha Regional International Airport and Pokhara Regional International
Airport.
Government has given continuity to master plan implementation program for touristic rich places
to develop them as major tourist destinations and to prepare master plan where such plans are yet
to be developed. Government has given continuity to build trekking trails and development
program. Government has given continuity to wider Janakpur Region Development Program.
Tribhuvan International Airport will be upgraded as per international standard. Under this
program, runway and parking way will be extended with Koteshore section of Koteshore-
Suryabinayak road by converting this section into tunnel road.
In order to increase inflow of tourists in the country, various programs were launched such as
Nepal Visit Year in 1998. Similarly in the year 2002 and 2003 Destination Nepal, Pokhara
Visit Year in the year 2007 and Nepal Tourism Year in the year 2011 was enacted.
With the objectives of producing basic and skilled workforce for tourism sectors development,
Nepal academy of tourism and hotel management has been providing vocational and
employment oriented trainings and offering bachelors in hotel management tourism and tourism
management courses and providing masters degree program in hotel management. In the fiscal
year 2073/74, it has been able to produce 3 hundred and 33 and one thousand five hundred and
twenty eight workforces in educational courses and other trainings respectively. During the first
eight months of the fiscal year 2073/74, the total number of the workforce achieving training in
tourism sector from the institution has been rallied to 77 thousand seven hundred and 12.
At present RA is facing many issues and has only limited destinations. Similarly the only
international airport is very improperly managed and is unable to handle large inflow of
guests.
Lack of infrastructural development: Nepal is beautiful country with various natural
sceneries, historical and religious sites, arts & architecture and social cultures. Nepal can
be the best tourism spot with the help of its unique features. But due to lack of
infrastructural development it is unable to utilize its features. If we are able to provide all
the infrastructural facilities we can attract a large number of tourists in our country.
Lack of conservation of cultural and religious sites: Nepal is country rich in cultural and
religious sites which helps to attract large number of tourists. But due to lack of
conservation activities such sites are being deteriorated which hampers tourism
development.
Lack of international Airport
Lack of proper tourism centers: We do not have proper tourism centers to provide them
necessary information. Tourists do not want visit places without any information. So,
tourism centers should be established in order to increase number of tourists.
Lack of publicity: Nepal is the beautiful country with various natural, cultural and
historical sites. But without its publicity it has got no importance. Nepal is unknown to
many peoples in the world which affects tourism development.
Lack of facilities and safety for tourists: We are unable to provide better facilities and
security to the tourists which is defecting tourism development in our country. They
should be free from fear and provided with better facilities which helps to increase
number of tourists.
Internal Conflict: There is a high chance of internal conflicts in Nepal such as strike,
Banda, political movements etc. which damages the reputation of tourism development in
Nepal among the tourist community.
Lack of qualitative human resource
Growing Cut throat competition
Destination getting expensive due to service charge and VAT
Suggestions:
NTB is still limited in marketing the NTY2011 program with orthodox marketing
techniques of travel fairs promotion and limited web profile system which need to be
adapted with a more dynamic marketing tools like Search engine optimization, aggressive
social network marketing, effective documentaries and previews in international travel
channels, etc
The completion of 3 international airports should be expedited.
The number and capacity of domestic and international air services should be increased.
There should be a good provision of transport and communication in tourism areas.
Tourists should be provided with of the things necessary for the tourists in the markets,
banks, and security.
Provisions must be made to produce the things necessary for tourism industry in our own
country.
Nepal should be introduced to the world through advertisement for its art, culture and
natural beauty.
Cultural and religious places should be well maintained and conserved.
Investors should be encouraged for the development of tourism industry.
Energy
Current Status
During the first eight months of the fiscal year 2073/74 electricity covered 4.1 percentage of the
total energy consumption while the occupancy of the electricity during the corresponding period
of the previous year was 3.7 percentages.
In the first eight months of the current fiscal year the total energy consumption has decline by
24.7 percent totaling 80257 tons oil equivalent (ToE), while such consumption during the
corresponding period of previous fiscal year was 10,970.
While looking at the statistics of the last eight months, the consumption rate of traditional,
commercial and renewable energy stood at 74.5 percent, 22 percent and 3.5 percent respectively.
Such ratio in previous fiscal year had remained at 55.3 percent, 42 percent and 2.7 percent
respectively.
If the production of the hydroelectricity goes on increasing we can minimize the part or
dominancy or demand of the coal, petroleum products and traditional resources. On doing this,
increasing trade deficit can be minimize in one hand and in the other hand the addressing of the
energy crisis could minimize the deforestation thereby creating a positive impact in the
environment.
So far in the last 100 years 961 MW of electricity has been produced in Nepal while the demand
is 1444 MW in current fiscal year. The production in dry season was 400 MW while 400 MW
has been imported from India.
There has been significant rise in production of electricity in fiscal year 2073/74 as compared to
last fiscal year. In the first 8 months of fiscal year 2072/73 total production was 18.5 MW while
in the first 8 months of this fiscal year the production has increased by 105.3 MW.
Currently there is no load shedding in Pokhara and Kathmandu while the load shedding has also
declined in other places. In the industrial sector the load shedding is around 4 hours while there
is no load shedding in houses. Currently there is 4 hours of load shedding in industrial sector of
Biratnagar while there is 6 hours of load shedding in industrial sector of Birgunj. In Bhairawa
industrial sector there is more than 6 hours of load shedding.
In the current fiscal year the consumption of electricity from various sectors are: housing
(45.4%), industries(36%), businesses(7.4%) and other sources(11.2%).
The demand for petroleum products has been continuously increasing. In the last fiscal year due
to unofficial blockade there was decline in monthly import of petroleum products by 16.5%
while for the current fiscal year the import has increased by 45%. As compared to 2071/72 the
import of petroleum products has increased by 21% for this fiscal year.
The demand for petrol, diesel, LPG and airlines fuel has been increasing while the demand for
kerosene fuel has been decreasing. In the first 8 months of 2073/74 the consumption pattern is as
follow: petrol (22.5%), diesel (67.5%), kerosene oil (1.1%) and ATF (9%).
In order to facilitate the storage of petroleum products the government has started to buy lands
for construction of storage in Jhapa, Sarlahi, Chitwan, Dhadhing, tanahun, Rupandehi and
Kailali. This storage can store petroleum products sufficient for the demand of 90 days.
For energy programs Rs. 62.47 billion has been allocated. The major highlights are:
1. The government has launched the theme Nepal ko Pani Janata ko Lagani to eradicate
load shedding from the nation and planned to generate 17,000 megawatts electricity.
2. Construction of at least 500 Megawatt Hydro-electric projects will be started with the
investment of Civil Servant, Nepal Army, Nepal Police, Armed Police Force, Teacher
and other public servants.
3. Electricity leakage reduction and control program will be implemented as campaign. In
order to minimize electricity leakage and electricity related accidents, construction of
underground electricity distribution lines will be started in few urban areas of Kathmandu
valley. In order to strengthen electricity distribution system, smart meter and grid system
will be continued to implement. Technical loss of electricity will be minimized by
improving electricity distribution lines in Kathmandu valley.
4. Construction of all Reservoir and peaking projects including Nalsingh Gad, Veri-1,
Jagdulla, Utterganga, Noumure, Sunkoshi-2and 3, Dudhkoshi, tamor will be expedited
simultaneously.
5. The budget has allocated Rs 10 billion for Budi Gandaki Hydro Project and projected that
the Chameliya and Kulekhani III would be completed next year.
6. Dependency over petroleum product will be reduced through the necessary production
and distribution of electricity to meet the demand of household and industrial sector,
replacing cooking gas, and using electric transport.