“Cottage and small industries call for more government support”

Cottage and small industries (CSIs) play a vital role in employment generation, skill development and effective resource mobilization in an underdeveloped economy like Nepal.

According to the government record, as of the fiscal year 2017/18, a total of 418,052 cottage and small industries (CSIs) have received operating licenses. Of them, 299,311 are currently in operations.

 There is a cumulative investment of Rs 41.195 billion in the cottage and small scale industrial sector which employs some 2.6 million Nepali people. An additional, more than 500,000 CSIs are operating without receiving licenses from any government agency.  The contribution of the sector to Nepal’s gross domestic product is estimated to hover around 15 percent. 

In her exclusive tete-a-tete with ceotab.com, Shyam Prasad Giri, President, Federation of Nepal Cottage and Small Industries, divulges his views on the prospects and challenges of the sector.  Excerpt:

1 ) How do you assess the current scenario of the cottage and small scale industrial sector in Nepal?

Of late, the sector has started to gather momentum. The restoration of political and economic stability is impelling a number of the Nepali youths, who otherwise might have opted for foreign employment, to start small scale industries in their own country.  This is helping inject more capital into the sector and make financially resourceful.

On the other side, the government seems serious when it comes to bolstering the sector. For instance, it, through the budget for 2019/20, has announced to provide subsidy in the import of raw materials needed for the CSIs. In addition, there is now the facility of interest subsidy in the bank loans floated to particularly such industries.

2 ) It is often bemoaned that the products of Nepali CSIs are not only below-the-mark but also lacking diversifications. What is your take on this?

It’s true that in the past they used to produce low-quality goods as they were unaware of the needs and aspirations of foreign buyers. Now, the situation is certainly not so. With an improvement in the information and communication systems, the CSIs in the country have easy access in terms of understanding/exploring the international markets.  In the same vein, the gradual advancement in production technology is facilitating them to diversify their products. That they now manufacture and export the goods made with natural fibers like felt corroborates this fact. It is also revealed in the export data released by the Trade and Export Promotion Centre, in which items of natural fibers hold a significant proportion of the country’s total export earnings.

3 ) What role is your federation playing for the development of Nepali CSIs?

 In coordination with the government, the federation is engaged in various skill development programs targeting the local manpower. Similarly, we have been conducting market research to identify the potential markets for the Nepali products. Moreover, it is also lobbying for the promotion of those CSIs, which are either based on agriculture or run especially by women.

4 ) Time and again, CSIs have been protesting against the government decision to allow foreign direct investment (FDI) in the sector.  Why so?

One of the fundamental tenets of the CSIs in the effective mobilization of local resources and skills. On the one hand, it is not only a major source of employment opportunities but also an important earner of foreign exchange in the country.    On the other, it has been helping preserve our traditional culture and arts.  Such being the reality, the idea of inviting FDI in the sector is imprudent.   This could well eventually lead to both economic and cultural turmoil.

5 ) What are the major challenges that the CSIs have been facing at present?

Despite some improvements, the cottage and small scale industrial sector continues to be bogged down by several anomalies.  For instance, the CSIs have to face unwarranted hassles while getting loans from banks. Similarly, the entrepreneurs, especially in the rural areas, are bereft of the subsidy packages offered by the government. Instead, a vested interest group and those having political connections have been capitalizing on such packages. Due to the above-mentioned problems, many CSIs are not only facing the deficiency of adequate capital but also being unable to expand their market access.

On the other side, the provincial and local governments are shying away from collaborating and cooperating with the CSIs. Specifically speaking, those who want to operate new industries related to the manufacturing of bricks and iron are being denied operating licenses by such governments on the pretext of environmental issues. This has discouraged them in a way that is inhibiting the growth of the entire cottage and small scale industrial sector.

6 ) What can be done to help buttress the sector?

The government needs to establish industrial villages proportionally all across the country by formulating a comprehensive policy. Likewise, there shall not only be the effective distribution of government subsidies to spur the growth of the CSIs.

Also, it behooves upon the concerned authorities to categorize the CSRs on the basis of their capital amount before opening them to the FDI.

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