SMEs in Nepal and NEED for Paperless trade

Rajan Sharma President, Nepal Freight Forwarders Association

and Member of Nepal Trade and Transit Facilitation Committee of the Ministry of Commerce and

Supplies, the Government of Nepal.

Objective of Paperless Trade

• Improving Predictability and traceability of SMEs as they are playing a vital role in the industries within the country and in export business.

• This will enable government to manage administration online and opportunity to integrate SMEs in supply chain including insurance, bank, freight forwarders, airlines and shipping line etc

• This will Increase clarities, transparency, traceability, avoiding red tape.

• That will save time, cost ,procedure compliance and reduce paper documents.

SMEs - Issues and Problems

• Landlocked position of Nepal leading to high costs.

• Lack of physical infrastructure and appropriate technology.

• Inadequate and irregular supply of raw materials and other inputs like labor and energy.

• Small size of international market and low domestic and foreign investment.

• Industry security due to labor problems and political instability.

• Poor industrial relations.

• Lack of conducive policy, regulatory and appropriate financing mechanisms.

Status

• Around 800,000 micro and SMEs in Nepal(formal/Informal)

• SMEs provide 82 % of employment and contribute 82% to export earnings.

• Small 80%, Cottage 18% and Large scale Industries Only 2 %

• 76% in Agro and 24% in non-agro sectors.

Advantages of SMEs in General

• Quick reactions

• Low overhead costs

• Close supervision & control

• Job creation and

• Contribution to GDP

• Employment generation

Recent Specific Challenges • Highly dependent on leadership

• Too many associations and unions

• Vulnerable due to limited product Range

• Quality and standard issues

• Capacity building system

• Infrastructure like SEZ’s/Hubs

• Lack skilled staff/Systems/Networking

• Domestic and Int’l regulation

• Capital/technology and innovation

• Limited Purchase & Supply management

• Market Linkages and Export procedures and documentations.

• NTMs covered and waived by the WTO agreements, like SPS, TBT and TRIPS.

• Lack of knowledge of the logistic services provided by Freight Forwarders.

Different Policies ranked SMES differently

Policy Small Industries Medium Industries

1 Industrial Enterprises Act, 1961

Capital investment of Rs 50,000

Investment between Rs 50,000 and Rs 0.5 million

2 Industrial EnterprisesAct,1974

Fixed capital investment between Rs.02. to Rs.1.0 million

Fixed capital investment between Rs.1.0 to Rs. 5.0 million

3 Industrial Policy, 1981

Capital investment of up to Rs two million

Fixed capital investment between Rs 2.0 to Rs. 10.0 million

4 Industrial Policy, 1992

Fixed capital investment not exceeding Rs. 10 million

Fixed capital investment between Rs 10 to Rs. 50 million

5 Industrial Policy, 1997 (amended)

Fixed assets not exceeding Rs 30 million

Fixed assets between Rs 30 and Rs. 100 million

Some Government policies related to SMEs

• Information Technology policy 2000 • FDI and technology Transfer act 1992 • Technical and Vocational training Act 1999 • Industrial Enterprise act 1992 • Industrial policy 1992 • Supply Act 2012 • Trade Policy 2008 • National Science and technology act 1989 • Three year interim plan(2007 – 2010) • First to tenth Five year plan. • National Single window and automation. • ET Act All of the above mentioned policies and regulatory provisions are

either incomplete and non-conducive for the proper development of SMEs business.

Some Institutional arrangements for SMEs

• Ministry of commerce and supplies/department • Ministry of Industries/department • Ministry of Forestry/department • Ministry of Agriculture/department • Ministry of Science and Technology • IEDI industrial enterprise development institute. • District Dev. Committees • Municipality and village dev. committees • Agriculture Development Bank • FECOFUN ( Federation of Community Forest Users Group Nepal) • Ne Fe SCUN,(National federation of Savings Credit Union Nepal) • FNCCI ( Federation on Nepalese Chambers of Commerce and Industries • FNCSI,(Federation of Nepalese Cottage and Small Industries) • MEDEP (UNDP and Gov. Nepal) Micro enterprises development project • TIE Training for Employment • C- TEVT( Council for Technical Education and Vocational Training)

Some achievements Harmonization CTD including AYSUCUDA World and Single

Window System with customs automation.

Customs program on e-customs with a master plan.

On line company registration, customs payment and tax filing.

E-ticketing and E- tracking of goods.

E-commerce on trading is on the rise and E- procurement act .

IGM filing with shipping lines.

Policies and regulation on the web and Trade Portal.

Improved telecommunication infrastructure

Donor agencies are committed.

RKC by customs for Risk management.

GPS Tracing system by Revenue intelligence department.

Major achievements • The (ETA) Electronic Transaction Act fully supports

less paper trade. The report of Arctiquator (KGH) for NSW finds no problems.

• The data centre is already established under GIDC( government integrated data centre.

• DRC ( Data Recovery Centre) is being established.

• e- signature works as per OCCA(Office of the certification controller authority)within one year through per Ministry of Science and Technology.

• Root certifying authority LOE is already published who will offer the facility under license.

• Transshipment modality and cargo tracking CMS( cargo monitoring system) NITDB/WB

Toolkit :Council of Technical Education

and Vocational Training

• Management of firms. • Negotiation. • Contract. • Managing the Logistics flow of goods and information as well as

finance. • Integrated quality management. • Inventory management. • Group purchase ( avoid commercial intermediaries) • Customer relationship. • E- Procurement/e-document submission systems. • Measuring and evaluation of performance electronically. • Environment management. • Crisis management. ( legal support, regulation of government)

Way Forward • Legal and authentication barriers overcoming e-commerce

legislation.

• Motivate government to adapt to UN certified format of invoice, packing list and other trade documents.

• Uniform contract(Country Specific),Purchase orders etc

• Make a soft ware i.e. Accounting system in line with government requirement.

• Customs policy need amendments to adopt to e- airway bill, e-bill of lading and e- release of goods(D/0) etc.

• Capacity building of SME’s though the Vocational training centre.

• Infrastructure (HUBs and SEZ)

• Financial support for establishment as well as training.

• High level SMEs promotion committee under NTTFC.

Way Forward • Pilot project on identified export oriented SME like

Handicraft.

• Implement the tool kit module and evaluate the performance before and after.

• Take the success story and implement else where as well.

Example: SME as Travel Agents today with paperless trade.

• Should begin with Women Enterprises involved in Handicraft export businesses they are committed and educated(F WEAN) women are 48.5 % active economically among total women population of 50.5 %( 9 % are in non agro sector and 91% in agro sector)approx 3 hundred thousand women entrepreneur in micro and small enterprises.

• We need to standardize technology with process simplification, harmonization of documents and procedures .

• Paperless trade will greatly increase efficiency of the supply chain and provide value added services as well as save labor cost, printing cost, storage cost, improve customer service, improve document security and reduce disaster hazard of the SME’s.

Conclusions

Conclusions

• There are legal as well as technological problem. • Capacity enhancement training is needed to meet the Int’l

standard/Awareness on WTO requirements. • Financial support is needed. • e- business literacy rate needs support. • Implementing National Single Window and Trade portal

will make a good base. • There is a big role of Freight forwarders in the trade in

managing flow of goods, flow of information and flow of finance and they handle documents and coordinate between agencies. Therefore, involving them in the endeavor of paperless trade for SMES will be beneficial.

Thank you !