Energy crisis seems to be the first hurdle in expansion of manufacturing sector that is important for economic growth. All the entrepreneurs surveyed in a study—Present State of Development of Manufacturing Industries in Nepal and Future Challenges—by the Central Bureau of Statistics (CBS) have rated energy crisis as the main reason for lack of improvement of industrial environment.
Hundred percent of respondents in the study done in 10 different sectors with separate questionnaires have agreed on energy crisis, that has been affecting Nepal for years, as a major problem. Eighty-percent had rated energy crisis as the main problem before this. Labor relation, lack of skilled workers, Environmental Act and others follow energy crisis as the major problems hindering development of manufacturing sector. 65.9 percent of respondents have rated labor relation as the second problem, 62.6 percent current Labor Act, 60.3 percent lack of skilled workers and Environmental Act, 59.2 percent industrial policies/laws, 53.6 percent raw materials, 52.5 percent access to loans, 49.2 percent low wage, and 43 percent market.
The manufacturing sector has not been able to functions as an engine for development, and its output has been falling by the year. The sector had contributed nine percent to the Gross Domestic Product (GDP) in 2000/2001 but that has shrunk to 6.2 percent in 2012/2013. Manufacturing group is 0.2 percent negative in comparison with population growth during the period. Contribution of the manufacturing sector has been falling even as that of transportation, storage, and communication and financial mediation has been rising.
Overall contribution of agricultural sector was 34.3 percent in 2012/2013, rapidly flourishing fish-farming 5.1 percent, electricity and water 4.1 percent, transportation, storage and communication 4.8 percent, financial mediation 6.6 percent and different service sectors six percent. The study states that manufacturing sector of the country will expand through technological changes, rise in production, rise of productivity and capital, transfer of more resources and means to the sector from agriculture, and positive spillover effects. It concludes that the manufacturing sector will expand in the coming days after National Investment Year 2012/2013, implementation of Industrial policy 2010, agreement between industrialists/workers, and implementation of No Work No Pay.
Difference in wage gap ratio has shrunk to 81.3 percent in 2011/2012 from 90.4 percent in 2006/2007. The study says economic expansion has taken place in Rupandehi, Bara, Morang and Kaski due to massive expansion of urban sectors there. Bara tops in expansion of manufacturing sector ahead of Kathmandu during the period. Bara contributed 30.8 percent to the manufacturing sector in 2011/12, Rupandehi 9.7 and Kathmandu 8.7. Kathmandu had contributed 26.5 and Bara 16.8 in 1996/97.
The study shows that load-shedding is the main reason for lack of fulfillment of market demands with 44.6 percent identifying it as the main reason. 21.7 percent feel it is due to lack of raw materials, seven percent lack of workers, five percent lack of finance, 4.5 percent lack of skilled workers, 3.4 percent environmental effects and 2.4 percent strikes. A total of 4,076 industrial enterprises were included in the study.
Competitive capacity of Nepal—that has been ranked 117th among 148 countries in the Global Competitive Index (GCI), and 119th among 135 in the Competitive Industrial Performance Index—has been found to be weak. Indicators like availability of energy, good-governance and ease in administrative works are also evaluated in those indices.
Source : Karobar Daily