Roots of growth

For a country with about two-thirds of its population employed in the agriculture sector, the development of Nepal’s agribusiness industry should be among the most important goals of the government. But while much lip service has been paid to the making of Nepal into a hub and a key player in the agribusiness space, successive governments have not quite been able to put Nepal on the agribusiness map as yet.  

The first problem Nepal faces is that of farm productivity. Only a small percentage of Nepal’s land area is arable and hence, it is important for the government to push for increased productivity in the farming sector. As with several other areas of the economy that this column has referred to in weeks gone by, here too the government is short of sufficient finances to address some of the most pressing concerns.

As such, the importance of private sector participation cannot be emphasised enough, either as a direct participant or as a financier. In the agribusiness sector in Nepal, there is a shortage of quality fertilisers; very poor access to finance; the unavailability of machines; little to no electricity; and not sufficient knowledge. In all of these areas, the private sector can plan an effective role and contribute to the development of the industry.  

However, once again as has been explained earlier, there need to be conditions that are conducive to private sector investment in the first place. Nepal has to encourage the private sector to invest in the agribusiness sector. The most critical aspect at present is to remove issues pertaining to the security of private property. Secondly, private players willing to engage in this sector should be provided with tax benefits in the first few years following their incorporation and these companies should be given incentives to export their products. They could also receive access to cheaper inputs from government to make the investing in the sector a more palatable proposition for other potential investors. 

Equally importantly, the government has to simplify the whole process of registering and conducting a business. While this is not a problem plaguing the agribusiness sector in isolation, it is essential that processes are fast-tracked for at least certain sectors of the economy and the agribusiness sector ought to be one of them. 

Nepal should focus on tea and coffee, certain sought after herbs, honey and other agro-processed goods that can be sold in the global markets. The private sector is already involved in the manufacture of agro-processed goods and food in a big way and the success of a few brands serves to demonstrate that focusing on this sector is likely to benefit Nepal in more ways than one. Investment in the sector can have wide-reaching benefits such as the creation of jobs, income generation, greater foreign exchange income, and the eventual creation of a thriving small industry space.  

As compared with sectors of the economy, promoting agribusiness will require less capital investment on the part of the government, but that is not to suggest that the government can go it alone. There are several opportunities for the private sector in agribusiness and in peripheral, related sectors, but it is imperative for the government to create the right environment that convinces investors of the security of their investments and also to provide incentives and benefits.  

It is making all the right noises. Now the next steps need to be taken.