September 23, 2015

Nepal business: a tough road

Nepal business


Nepal is landlocked between China and India. World demand for the country’s exports is growing. Most goods going overseas have to be shipped to the port of Kolkata in India, a land journey of 1-3 weeks. The road from Kathmandu to Kolkata is long and hard.

And beaureaucratic — with many certificates, documents and approvals to be shuffled in Kathmandu, then half a dozen checkpoints along the way.

And dangerous. The 33km road from Narayngadh to Mugling, in the middle of the trip, is notoriously deadly, with steep inclines, rockfalls, and unpaved sections.

And not networked. The 5 major border posts each has its own database, not connected to the computer network in India.

The situation is equally difficult for imports, with delays and added costs. It’s the same rough road, in either direction.

In the Regional Trade and Transport Facilitation Project for Nepal and India, the countries and the World Bank are working to streamline the process, improve the road, and open new portals to trade.

Work on the Narayngadh to Mugling stretch of road is expected to cost $99 million and be completed by summer 2017.

Nepal’s agrarian economy employs 75% of people who are working. South of Dharan, the flatlands of Nepal, the Terai, is the most fertile region in the country, producing a rich harvest of rice, jute, sugar, mustard, tobacco, and herbs and spices.

Industries are employed to process agricultural products: legumes, jute, sugarcane et al.

Ancient crossroads of human cultures, rich in historical sites, artifacts, and ways of life, Nepal attracts the world to explore its terrain, from the world’s highest place, Mt Everest (Sagarmatha, Chomolungma), to the Heart of the Jungle on the Terai floodplains, and all the culture, art, and geography in between.

Tour and expedition guides in Nepal (eg Sherpas) have a reputation for tireless support work, lightness of spirit, and for instigating a familial esprit among teams, even in the face of sometimes deadly risk.

Tours, treks and adventures account for 8% of Nepal’s $66 billion economy.

Nepal is the world, in extreme microcosm: old and new, high and low, conscious and reflexive. All reflected in business practices which were traditionally bureaucratic, formal, and top-down — and like the road from Kathmandu to Kolkata, a costly way of doing business.

Broadly speaking, private organizations have traditionally responded to family pressure, and government organizations to political pressure. Leadership style has been autocratic, with lack of coordination, communication or teamwork. The view of control has consisted essentially of threats and penalties.

This all sounds familiar, a reflection writ small of the whole world, which is changing but hasn’t changed. In Nepal, changes in business culture are coming in management systems of banking, insurance, hotel, airline, communication, joint venture, and multinational companies.

These systems themselves will have to continue to change, on a planet that is on the road to transformation, still a pretty tough road.

Export destinations: India 51%, US 12%, Germany 6.8%, China 5%, UK 3.5%

Exports: Knotted carpets 15%, flavored water 6.9%, misc plastic products 6.2%, small pipes & tubing 5.3%, synthetic yarn 4.9%

Import origins: India 51%, China 39%, Singapore 1.5%, HK 1.1%, Thailand 1.1%

Imports: Refined petroleum 16%, knit men’s suits 7.2%, petroleum gas 4.4%, knit women’s suits 4.4%, non-knit men’s coats 3.6%

Estimated potential for hydroelectric power generated by Nepal’s many rivers and steep flow gradient is 40,000 MW, with a large percentage capable of being exported. Current development is at 600 MW.

Electricity supplies only 1% of Nepal’s energy. The rest is fuel wood 68%, agricultural waste 15%, animal dung 8%, and imported fossil fuel 8%.

In principle, development of hydropower could reduce environmental degradation caused by energy needs, but will have to be implemented with consideration of ecological and social implications.

Private and foreign investment is necessary to make hydropower happen in Nepal, a large portion likely coming from India and China.

Cement production and tea exports could benefit quickly (5 years) from construction of wind farms to replace costly dependence on diesel fuel.

A wind map shows that most tea factories and cement industries are in feasible areas for wind energy generation.

Wind power could be a quick fix for diesel-intensive industries in Nepal if the initial cost of a wind turbine ($1 million) and storage system can be ameliorated. The government subsidizes smaller energy projects only, so wind power is a solution in search of a capital cost mechanism.

NEWS ITEM: Electricity income not keeping up with liability                     KATHMANDU, Aug 18:  The Nepal Electricity Authority revealed that its income rose by 5.8 percent to Rs 32 billion in the last fiscal year, but its liability to the government has increased to Rs 49.63 billion. Its current assets are worth Rs 84.36 billion. The NEA has invested Rs 16.53 billion to develop hydropower projects through its subsidiary companies.

Demand of electricity rose to 7.5 percent to 1291 MW in the last year and supply was 706 MW. There was load-shedding of up to 11 hours a day due to shortage of 585 MW in the system. Load-shedding could not be reduced despite operating diesel plants and importing electricity from India.

In a virtual Nepal, a few of us met, and built a human-oriented psychological workbench for learning, meeting and creating: the Knowledge Expeditions. Along the way we met the people of Nepal. Now the virtual and real Nepal are united by virtue of  the people who live in both worlds, in one virtuereal Nepal.

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