The much condemned grim investment climate has however not halted the growth of the manufacturing sector although the growth rate is not impressive. Statistics show that in the last five years, the manufacturing sector has registered an average growth rate of 1.7 per cent while, major industrial production index in the fiscal year 2011/12 increased 3.8 per cent to 111.6 from 107.5 in 2010/11, according to the Economic Survey published by the Ministry of Finance (MoF). 

 

According to the MoF, production of food products, beverages, cigarette, shoes, soaps, cement and plastic products increased by three percent in the fiscal year 2012/13 compared to 2011/12. The Economic Survey also says that a total 279 new industries received operation license in the fiscal year 2011/12. Among them, 59 were from manufacturing, 33 from energy and 12 in the agriculture sector. Similarly, 105 new companies were registered in the service sector, 61 in the tourism, seven in the mines and minerals and two in the construction sector. These industries created an employment opportunity for 16,960 people while the total investment in these industries was Rs 84.47 billion. 

 

Similarly, 4,831 new companies were registered in the fiscal year 2011/12 and among them 2,207 (45.7 per cent) were in the manufacturing sector. This shows that the establishment of the new industries in the manufacturing sector is in a rise despite overall unfavourable business environment. Industrialists say that the Nepali manufacturing sector is suffering a lot because of long hours of power outage, labour problems, high interest in banking loan, unstable politics and policies and shortage of raw materials among others. Therefore, most of the industrial houses have put themselves in a wait and watch mode. 

 

Moti Lal Dugar, Chairman of TM Dugar Group - one of the oldest industrial houses - says that his group has made a strategy to sizing down and even closing some of the group’s manufacturing unit and not to add any new industries in the manufacturing sector because of the unfavourable environment Nepali industries are facing. Similarly, many groups that had prior concentration in the manufacturing sector are gradually moving into the service sector and trading as new alternatives to manufacturing sector. 

 

However the business community has not yet lost its hope. They believe if they can manage through the troubled times, a day will come when the overall situation of the country improves bringing positive changes in the manufacturing sector. For that, they believe there must be energy supply and the stable policies, political environment and a stable government. Saurabh Jyoti, Director of Jyoti Group and also a young entrepreneur reveals that in the lack of electricity, his company installed a 4000 KVA generator to operate Himal Iron Industries with an investment of Rs 50 million which he says could have been invested in a new business venture. 

 

The government in its budget for the fiscal year 2012/13 has decided to establish new industrial district. No new industrial districts have been set-up for 25 years in a row. Similarly, the government is set to operate the special economic zone in Bhairahawa from this fiscal year. Likewise, in the fiscal year 2011/12, 227 industries with foreign investment received operational license with an increase of 8.6 per cent compared to the previous fiscal year.

 

Manufacture in a Snapshot 

• Number of medium and large industries: 1000 

• Employment creation: 300,000 

• Number of cottage and small industries: 100,043 

• Employment generation: 550,000 

• Number of industrial districts: 11 

• Number of industries in those districts: 600 

• Industrial corridors: 7 

• 80 per cent of industries operating in corridors 

• Average production capacity utilisation: 44.72 

• Contribution to GDP: 6.2 per cent 

• Average growth rate in the past five years: 1.7 per cent 

• BFI’s investment in manufacturing sector in 11 months of the FY 2012/13: Rs 286.39 billion