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

No. of projects approved

0

50

100

150

200

250

Upto

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Number of projects with foreign collaboration

Status…Scale of projects with foreign collaboration

146199

1151

0

200

400

600

800

1000

1200

Nu

mb

ers

Large Medium Small

Industry category

Status…Category of projects with foreign collaboration

Manufacturing89%

Energy-based3%

Agro-based3%

Construction4% Mineral-based

1%

Status…Status of foreign investment projects

Operational27%

Under construction

17%Licensed

8%

Approved42%

Cancelled5%Closed

1%

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