Micro, Cottage and Small industry and its Co-ordination with Export Promotion Presented at:

1. Micro, Cottage and Small industry and its Co-ordination with Export Promotion Presented at: Conference organized by National Open College Presented by: Suman Kumar Regmi,Ph.D Nov. 19,2016

2. Abstract: Export promotion is the main target of industry in the country. Industrial sector including MCSI has third rank in the country’s economy contributing 6 percent growth in industrial sector. Micro, cottage and Small industries(MCSIs) have been privileged in the pages of present and earlier IEA, IP , and other Acts of Nepal. • MCSIs sector has not been seemed open for FDI. Investments in this MCSIs industry are not too less. Encouragement of MCS scale entrepreneurs have not been seen for encouragement for more investment in this sector. • Lack of about 30 -40 acts enactment and amendment has hampered the smooth functioning of the entire system of acts, polices, rules and regulations for the better development of the entire economy including the MCSIs. • The share of MCSIs including all industrial sectors in GDP has been dropped to 6.2 percent in fiscal F.Y. 2067/68 (2010/11).

3. Ten years back in 2057/58 Bikram Sambat B.S ( 1999/2001 A.D),the growth of industrial production was almost zero. The industrial growth rate in 2069/70( 2012/13) , 2071/71 and 2071/72(2014/15) was attained at 2.7, 6.0 and 2.6 percent respectively. • It seems that the export of carpet, garments, Pashmina and like these products have not been attained mass production and massive export because of not entry of FDI in these MCSIs. • The main hurdle in export promotion of Nepal lack of mass production in exportable items and massive export trend. I. Introduction The economic growth rate in 2015/16 has been attained at 0.77 percent. The industrial production of MCSIs surely has been dropped in 2015/16 because of earthquake and stoppage of smooth operation due to Indian blockade. Before this , the contribution of industrial sector including MCSIs in GDP was 6.1 percent. MCSI has more share in GDP than MLI.

4. Those industry which has less than Rs. 3 Crore investment ( About 0.3 Million US Dollar) has been assumed as MCSIs. Beyond this amount of investment is taken as MLI (Medium and Large Scale Industry) according to Industrial Policy of 2010 (2067). • It seems that very few MCSIs are in operation among the registered MCIs. Whatever are MCSIs are in operation, they never run in full capacity. • Till 2072,Rs. 4 billion investment has been seemed for commitment in MCSIs. But very few amount has been invested in MCSIs. • During the Indian blockade in 2072, 22 hundred industrial units including MCSIs have been disturbed. • The country’s export in 2071/72 (2014/15) was Rs. 85 billion. The highest export peak was maintained at Rs. 91 billion in 2013/14.The export of FY 2015/16 (2072/73 ) has gone down to Rs.70 billion. The available export of some mths. data in 2016/17 has been Rs. 13 billion (One US Dollar is equal to about NRs. 100)

5. The exportable products including of MCSIs are carpet, garments, hides and skin, lentils, cardamom, tea, ginger, vegetable fats and oil, noodles-pasta, medicinal herbs, essential oil, juices, toothpaste, yarns, textiles, woolen and pashmina, jute bags and sacks, cotton sacks and bag, hats and headgear, handicrafts, Nepalese paper and paper products, silver jewelry items, iron and steel products, copper and articles ,meat and edible meat offal and other miscellaneous items. • MCSIs and export sector has been influencing by labor disturbances, load shedding, Bandha/Chakka Jam/Transport entrepreneurs strike, lottery, donation, dharna/Birodha, demand letter, suggestion proposal etc-etc including procedural hindrances in export and MCIs sector. • Massive amount of raw materials for all industries including MCSIs has been importing from abroad. More than 160 raw materials have been importing into Nepal.

6. The provision of facilities and incentives given to MCSIs as in Industrial Enterprise Act 2049 and Industrial Policy 2010 has not been regularized because of not tally with amendment and curtails in Industrial Enterprise Act itself and other acts like Income Tax Act 2054 /2058, in every years’ budget, Aarthik Act etc-etc. • In the mean time,special Economic Zone Act 2073 and New Industrial Enterprise Act 2073 will create new environment for export promotion of the MCSIs. • Import substitution concept has been applying in the sector of cement, iron and steel product, soap, food items, fruits, medicines, tea, juices, textiles, vegetable fat, tooth paste, garments, and other sectors.

7. II. Methodological Aspects In order to know the export performance of the country, government and private sector Trade Support Organizations are taken as samples. • The data were collected from various trade indicators like export, import, trade balance, country-wise and commodity-wise export, top exportable items and top export destination countries. The trade related publications have been used in the study. The last some years data have been used in the study. Descriptive cum analytical design has been used. • The model takes the following form: Successful Export Performance of the country is equal to management of EP,EPM,EIM,ESM,EMM, EMM. More specifically, EP is the function of export performance, export policy management, export infrastructure management, export supply management, export market management and export model management.

8. Does the export performance of the country is the result of managing export performance, policy, export infrastructure, export supply, export market and export sector coordination? Is there significant relation between Nepal’s export performance and managing all the above independent variables? • Export performance of individual major items have been taken for analysis. Export policy has not been seen stable and not cope with the situation. Export infrastructure has been reviewed to know the export capability. Export supply availability has been the main constraint for export promotion. Target export market has been seen concentrated to a few countries. SARRC countries have occupied about 70 percent of the total export of Nepal. Export sector management has been seen lacking and export sector integrated model is needed for the country. • Individual comment heartily is welcome for my further study. This paper may be in lacking form to audience and listeners.

9. III. Results and Discussion The industrial production in MCSIs has been hampered by old machineries. The industrial activities have not been changed even formulating new acts, policies , rules and regulation. • Many MCSIs may be closed down due to various constraints. In every fiscal year, export items of MCSIs have been in ups and down. But export of these items have not been attained drastically. • The earlier program of rehabilitation, reconstruction, restoration for MCSIs have not been made regularity. Even though some steps have been taken for the promotion MCSIs have taken in the past , noticeable achievement have not been seen in the export figure. • Nepalese exportable items are scattered and exported in about 130 countries, but their export value is in negligible export amount accept a very few. It can be compared with the amount of sample exportable items.

10. The 5th IP 2010 and other 4 including 1st IP since 1956, have not met with the country’s export need. • As the statement of the concerned body, a few amount in yearly government budget for MCSIs development have been set . And no sufficient incentive has been offered to MCSIs in export sector. • The policy-wise system, special strategy, industrial administration arrangement, provisions in customs/excise/VAT/other para -facilites and other facilities and incentives given to MCSIs as mentioned in the IP 2010(2067) have not been implemented due to lack of coordination among the MCSIs related acts, polices, rules, regulations, and directives.

11. IV. Conclusions and Suggestions Nepal should give emphasis for the production of those exportable items which have sufficient scope in own raw materials, local skill, arts and artifacts, and own resource endowment. • The importance of human labor in exportable items of Nepal has not been identified well to the importers. The manual labor in items can snatch valuable amount if the importer is convinced. Nepalese brand identification of each exportable item should be maintained. • Newly modern manufactured items should be established side by side in the country. • FDI should be allowed in MCSIs on the condition of using Nepal’s own resource endowment. Very negligible amount of profit earned by such FDI based Nepalese MCSIs should be allowed to return back to their country.

12. Long term sustainable MCSIs should be established. • For the entire operation and adjustment of MCSIs sector, strategic change concept of strategic management should be given due emphasis in policy –wise , legal restructuring, institutional reform, procedural reform, national priority sector and other needed sectors. • In the context of above presentation, integrated industrial and investment friendly environment should be created automatically through the functioning of MCSIs itself. Thank you