SMEs AND TECHNOLOGY TRANSFER IN NEPAL Prof. Dr. Dilip Subba Secretary Nepal Academy of Science and Technology Nepal

Presentation Sequence About the country Industrial development Classification of industry Policies Technology transfer in Nepalese SMEs Modality of technology transfer Status of technology transfer

Presentation … Organizations involved in technology transfer and development Constraints Conclusion

The Country Landlocked country, situated between China to the north and India to the east, west and south. Total area 147,181 sq. km Altitudes ranging from less than 100 meters in the south to the highest peak of the world 8848 meters Mount Everest in the north

Ecological Regions Mountain region ( >3000m, 35% of the total area and 7.5% of the population living) Hill Region ( 42.0% of the total area and 44.5% of the people living) Terai Region (southern part of the country, 23% of the total area and 48% of the population living)

Administrative Structure 5 Developmental Regions : Eastern, Central, Western, Mid-western and Far- western Further divided into 14 zones and 75 districts Lower administrative units : Village Development Committees (VDCs) and Municipalities 3195 VDCs and 58 municipalities

Economic Indicators Developing economy: transferring from rural to urban and traditional to modern market oriented Predominantly agricultural country, about 80 percent populations deriving their livelihood from this sector and the main source of gross domestic production (about 40%)

Planned development efforts for five decades All development plan’s overriding objective: poverty reduction Approximately over 30% of the population living below the poverty line Irrigated land: 30% Per capita income : 322 USD Economic …

Other Features Total population : 24.2 million Official language : Nepali Majority (about 80%) of population Hindu and second largest group Buddhist (about 11%) Average life expectancy at birth: 63 years Literacy rate : 54.1 percent

Industrial Development in Nepal Industrialisation in modern Nepal began only after 1951, however, it dates back to 1936 with the establishment of Biratnagar Jute Mill Nepal’s industrial sector characterised by a large number of small establishments, highly dispersed geographically, dwelling between formal and informal sectors of the economy

Classification of Industry Large industries: industries with fixed assets of more than 100 million Nepali rupees (NRs) Medium industries: industries with fixed assets between 30 million rupees to 100 million NRs Small industries: industries with fixed assets up to an amount of 30 million NRs Cottage industries: traditional industries utilising specific (indigenous) skills or local raw materials and resources, labour-intensive and are based on national tradition, art and culture and industries with fixed assets up to 200,000 NRs Approximately NRs 68 = 1 USD

Policies Initiation of integration of technology policy and development planning in 1980 Objectives of Industrial Policy being promote export and develop import substituting industries Offer of an array of incentives (concessional import duties, tariffs, tax exemptions etc) to boost industrial growth Attract Foreign Direct Investment

Technology Transfer in Nepalese SMEs Foreign Investment and Technology Transfer Act, 1992 The Act defines technology transfer as any transfer of technology to be made under an agreement between an industry and a foreign investor on the following matters: Use of any technological right, specialization, formula, process, patent or technical know-how of foreign origin; Use of any trademark of foreign ownership; Acquiring any foreign technical, consultancy, management and marketing service

Technology Transfer…… Facilities and concessions provided to foreign investors: Except for the projects listed in the negative list, 100 percent equity participation by foreigners is allowed in almost all sectors. The industries listed in negative list are cottage industries Technology transfer is allowed even in projects where foreign investment is not allowed Firms established with foreign participation are treated equally as 100 percent Nepalese-owned firms

Technology Transfer… Facilities and concessions… Interest paid on loans obtained from foreign source is tax free Income from royalty and technical management services is levied a standard tax rate of 15 percent Residential and business visa is provided for foreign investors and their dependents Non-nationalization of industry is assured Provision of dispute settlement between the contracting parties; Expatriate employees in firms with foreign equity can take back up to 75 percent of their salary income abroad

Modality of Technology Transfer The most commonly used modalities: FDI via joint ventures, technical collaboration, import of machinery and equipment, technical assistance through human assistance Other mechanisms -- through license, exchange patents, or a know-how agreement, personal contact etc.

Status of Technology Transfer Number of projects with foreign collaboration

Status… Scale of projects with foreign collaboration

Status… Category of projects with foreign collaboration

Status… Status of foreign investment projects

Organisations involved in technology transfer and development Ministry of Environment, Science and Technology (Estd. 1995) - Apex government body for S & T - Development and implementation of S & T policy

Organizations… Nepal Academy of Science and Technology (NAST)(Estd. 1982) Some of NAST's technological collaborative projects include: Solar photo-voltaic water pumping and lighting system Biomass briquetting technology Natural current river boat

Organisations … Research Centre for Applied Science and Technology (RECAST) Some of the Centre’s work in S&T include: Energy sector: solar drying, bio-mass, bio-fuel, improved cooking stove, water turbines Low cost housing Natural dye, etc. Other organizations: Nepal Agricultural Research Council (NARC) Technology Transfer and Development Project Department of cottage and small industries Non-government organizations

Constraints Private sector lacks co-operation and support from different government agencies. Government blamed for not providing industrial facilities Lack and anomaly of raw materials, short supply of electric power, lack of auxiliary facilities Lack of working capital, lack of specialized technical manpower, small domestic market

Constraints No institution to collect information on advanced technology, monitor technology transfer and provide advice on technology transfer. Learning tendency and mechanisms are weak Technology transfer obsessed with hardware part only Lack of modernisation, dynamism and innovation in industrial sector No coordinated action between academia and industry

Conclusion Slow transformation to a higher technology level Foreign direct investment not very encouraging Creation of a strong link between universities or research centres and industry is must Role of industrial consultancy should not be underemphasized Need to create conducive environment for industrial development and technology transfer Development of innovation and industry clusters