Bikalpa an alternative organized a public private dialogue on its recently published policy brief “Micro and Small Enterprises: A Policy Outlook”. The program was organized on 16th April, 2021 at the premises of Hotel Ratna, Biratnagar. Honorable Vice-chairman of Provincial Planning Commission, Province No 1. Mr. Subodh Raj Pyakurel, academician Dr. Bhesha Prasad Dhamala, Vice Secretary of Ministry of Industry, Forest, Tourism and Environment Mr. Top Bahadur Shrestha and Former President of FNCSI Mr. Narendra Humagain were invited as panelists. Alongside, key stakeholders from various provincial ministries, business associations, civil society organizations, local government representatives and journalists participated in the event.

The program was moderated by academician and media personality Dr. Sandesh Das Shrestha who provided time slots for each of the panelists to put forward their perspective on micro and small enterprises. Following the keynote speech from the panelist, the floor was opened to include opinions from the 30 stakeholders present in the discussion who put forward their views. Here is an excerpt of what the panelists spoke.

Top Bahadur Shrestha (Vice Secretary, Ministry of Industry, Forest, Tourism and Environment, Province no. 1)

• Role of MSEs in the nation’s GDP will be determined by the government’s facilitation to the sector in a sustainable way.
• The government has a simple principle: Entrepreneurs are the ones doing business while the government agencies are the ones monitoring and regulating.
• The ministry has been trying to integrate officials from various offices into one place to every services from registration to exit. We have envisioned an integrated service delivery mechanism through one window policy and are working on it.
• EIA and IEE guidelines have now been framed while exit policies have also been streamlined. Policies and working guidelines for technology transfer had been framed but have been postponed for now.

Subodh Raj Pyakurel (Vice Chairman, Provincial Planning Commission Province no. 1)

• This discussion is happening at the right time as we are drafting various policies for the upcoming fiscal year. The provincial government is very willing to help and frame policies that can make this sector sustainable and a thriving one.
• One of the glaring short coming of the government is that generally it is the last entity to understand innovation.
• The most notable challenges for entrepreneurs is innovation. We have many businessmen but few entrepreneurs.
• There is a need to identify value chain and help in management transition.
• 5 approach to industry include: Production, Branding, Storage, Marketing and Packaging, and explore for avenues to decrease cost on these.
• CTEVT is not producing technical manpower as per the market need.
• On the governance side, the definition of rule of law is problematic in Nepal, as bureaucrats easily take tax payers for granted and can easily delay proceedings, which is rule by law, and not rule of law.

Dr. Sandesh Das Shrestha (Moderator, Academician and Media Personality)

Generally, research studies on local issues emulate policies from other countries instead of providing organic and local solutions. Bikalpa’s policy brief has tried to provide local perspective through a research conducted locally.

Dr. Bhesa Prasad Dhamala (Academician and Economist)

• Micro and Small industries contribute to 30-40% of economic output in emerging economies but have been overlooked in our country and that explains our present economic situation. It has significant contribution from the perspective of income generation and poverty alleviation.
• The paper needs to highlight the significance of microfinance as well.
• Market linkage and technology transfer are more important areas to focus as compared to Foreign Direct Investment, which is not that important for this sector as we can easily sustain this sector through local finance.

Narendra Humagain (Former President of FNCSI, Morang)

• Our policies have provided many benefits to entrepreneurs but from my personal experience, such benefits are not available in practice. The Bank and Finance Institutions (BFI) sectors are not complying with the Nepal Rastra Bank’s directive of investing at least 10% in the micro and small industrial sector and have invested largely in unproductive sectors.
• Most concessional loans are availed through political appointments.
• Political favoritism and lack of proper implementation of policies have made it difficult to procure raw materials from aboard due to very biased laws related to obtaining EXIM codes. The government facilitated National Trading that used to import raw materials and provide to various entrepreneurs during the Panchayat era provided a more level playing field for small entrepreneurs.
• There is a problem of having to pay double taxation on various registration and renewal documents.
• Government takes pride in having formed EIA and IEE guidelines which are very extensive. There is no facilitation for micro and small entrepreneurs to comply with those guidelines. Many entrepreneurs are scared away by the sheer amount of documentation required.

Tara Sir (Chamber of Industries Morang)

• Rather than following a systemic and sequential development Nepali development model is still based on forced development. Most of the laws in Nepal are made with the intention to control rather than facilitate.
• The government needs to focus on streamlining stringent guidelines like EIA and IEE and facilitate small business owners in that regards.
• Industrial Village has been talked about for decades and neighboring India has had many successful examples of it but our planners have not showed the will power to implement that concept in the country.
• In recent years politicians have begun the culture of political visits to foreign countries or local government as a political visit. Instead, they also need to cash in on those visit and learn the industrial capacity of those areas during the visit.

Mani Kumar Aryal (Nerude Micro Finance)

• Small industries have had good production but no markets to cater to.
• Quality control is another an issue where MSEs need to mature as they are notorious for unreliable quality.

Chudamani Bhattarai (Chamber of Industries, Morang)

• We need to focus more on the development of businesses rather than just trying to ease out policies to include FDI.
• Skill gap redressal is needed but there needs to be more study so that we can identify sector based skills.
• The paper has talked about replacing subsidies with market based solution is also very presumptuous and vague. Subsidies are backbones of small businesses and just letting them face the market will have a negative impact in their growth.
• MSEs are also regarded as the missing link in the value chain. The government needs to address their concerns for a sustained industrial growth.
• The paper also missed out on the problems in sub-contract. The contract manufacturing clauses of the government should also have been incorporated into the study to make it holistic.
• Access to finance has been mentioned as a problem but no exact reason have been pin pointed. Reasons behind it needs to be highlighted.

Bimal Sapkota (Chief Officer, Inland Revenue Department, Morang)

• We are very cautious with registration because there is widespread cases of tax evasion through means of registration of new industries.
• Lot of documents are forged to get concessional loans from bank. This also causes us to raise suspicion as we have found many incomplete documents during filing of tax and that slows down our work. BFIs need to understand their customer better before providing them loans using unverified documents.
• There is also lack of scheming policies that have further complicated the process. Various schemes are declared by the three forms of governments which do not correlate with each other and create confusion.

Sabita Koirala (Micro and Small Enterprises Development Program)

• The ministry of industry needs to be a separate entity as it is a major sector in itself. Currently the ministry consists of forest, environment and tourism as well due to which the ministry is generally occupied with forest and tourism related works.
• The paper criticizes the micro and small enterprises without providing proper evidences. These programs have been running for 2 decades and have uplifted millions across the world from poverty. They should have at least mentioned a citation as to how the MEDEP programs have failed in Nepal.
• It would be better to include the limitations of the study in the paper as well.

Laxman Budathoki (Micro Enterprise Federation of Nepal)

• While there are many policies and even an Industry promotion board set up at the provincial level, the government has not followed or build a proper protocol.
• There is a lack of proper guidelines for registration of micro enterprises in Nepal due to which it is hard to register through ward official and the MSE entrepreneurs need to come to Office of cottage and small Industries to register.
• The entrepreneurs haven’t been able to avail any benefits as mentioned in the IEA 2020.

Gopal Kafle (Federation of Nepal Cottage and Small Industries)

• MSEs can only grow when we can change the perception of people towards it as an innovative service provider and producer.
• Habit of imitation has also made it unsustainable for micro enterprises to prosper as everyone imitates each other and no credible innovation is done.
• There are many procedural hassles like registration, exiting the business, exim code, vehicle tracking system (VCTS).
• We have opportunities to set up industrial parks and villages and don’t need to wait for the center’s approval for the same. Provincial and Local governments are also capable of making that happen.
• Job linkage and internship programs are needed to improve the skill gap.
• We need to focus on capital increment by allowing MSEs to prosper by providing investors with proper guidelines instead of multiple documents.

Santosh Pokharel (Chief Officer, Department of Commerce, Supplies and Consumer Protection, Biratnagar)

Lot of confusion on guidelines are present. Under the Department of small and cottage industries, the firms need to renew registration in every three years, while if those firms need to trade, they will also need to renew license under our department, and since we come under the central government, the renewal has to be done every 2 years. Many other laws pertaining to federal, provincial and local governments contradict each other. There is a need to streamline them. There also needs to be proper linkage between the producers and the industrialists as many small businesses could supply raw materials or unfinished products to large industries instead of them importing it from aboard.