Oct 31, 2014

Out of Country but Out of Poverty

I have recently started writing for The Global Entrepreneur which is Sweden based online magazine that focuses on issues related to globalization and entrepreneurship. As the first write-up for The Global Entrepreneur, I wrote about the migration for foreign employment trend in Nepal. Well, that is not exactly a novel topic in our case, is it? However, in the article, I have tried to explain how foreign employment is helping Nepal and why it is not that bad to be dependent on foreign employment and the remittances it brings. My argument is what else can a rational person do when the rulers and government have created an environment where a person cannot hope to flourish through hard work and enterprise.

Below is an excerpt from the article:

Image Source: http://www.nepalmountainnews.com
Every day more than 1,500 able-bodied Nepalese citizens leave their abodes, seeking better lives and better opportunities in foreign countries. Many of them end up in the Middle East as construction workers, building stadiums for the World Cup in Qatar, and infrastructure in other gulf countries.

If Qatar hosts the FIFA World Cup in 2022 successfully, Nepal will be among the nations it will have to be thankful to.

Some of the workers have to be content with working menial jobs in different industries. Uddhab Danuwar, 28, is one of them. A native of Panchkhal Village of Kavrepalanchok District, he first migrated to Kathmandu and worked for a pashmina manufacturer for a few years. Uddhab was employed in the coloring and dying process there, and earned Rs. 15,000 a month (USD 154). Last October, he flew to Saudi Arabia for an employment opportunity at a hotel where he currently earns 1,200 Saudi Riyals (USD 320) a month.

“With my meager income back home, I and my family could hardly survive. Here, not only have I been able to cover my expenses, but also save some money to send back to my family,” Danuwar tells The Global Entrepreneur.

“The work is very tough here. I still find it difficult to adjust with the culture and climate, and I miss my family a lot, but I think it’s worth the struggle.”

Paradoxically, their sacrifices didn’t come in the form of sweat and labor alone; in the last year alone, 862 Nepalese lost their lives while being engaged in employment abroad, many of who were building the skyscrapers and stadiums.

As immigrant workers, they are not treated properly as domestic workers would have been. The horrible working environments these migrant workers have had to face in the host countries have made headlines in international media. Some reports have gone to the extent of alleging that foreign workers in Qatar are being treated like cattle.

Yet, the line of emigrant workers waiting for their flights at Nepal’s only international airport keeps getting longer and longer. Care to wonder why?

Read the full article in The Global Entrepreneur by clicking here.

Sep 14, 2014

Promoting Entrepreneurship in Nepal

Click on the image to view full size!
Lately entrepreneurship has become a buzzword in Nepal. Entrepreneurship development seems to have caught the attention of the non-profit sector as well as the private sector, even the government to some extent for better or worse. Non Government Organizations (NGOs) and International Non-government Organizations (INGOs) are trying to incorporate entrepreneurship component in their areas of work, private sector has started experimenting venture capitalism and the government has come up with plans to dole out money in the name of entrepreneurship. Increased interest in entrepreneurship among the various actors in the society is appreciable. Entrepreneurship is the ladder delivering economic growth and development in any society regardless of its current economic status. Hence, recognition of entrepreneurship as an important issue for the society can be considered a step in the right direction. Better late than never.

However, entrepreneurship as a skill set or as a resource of the society is different than any other resources in the society. Treating entrepreneurship development like any other developmental issues is likely to corrupt it and lose its value for the developmental sector, if not for the society. As Dr. Ernesto Sirolli, the world renowned entrepreneurship development consultant pointed out during his visit in Kathmandu last week, thousands of initiations by international donors in developing societies like Africa have done more damage than good despite their noble intentions. The major mistake made by the donors is to assume that they know better than the locals and patronize them. The follies made by international donors in developing societies of which Sirolli was once a part has given him a simple but difficult lesson to make economic development initiations more effective i.e. shut up and listen.

Understanding the real problems

Unlike other issues, entrepreneurial journey is about innovating and taking risks to produce something of value to the society which in turn brings revenue to the enterprise and uplifts the living standard of the people involved. Entrepreneurship is not for everyone and even for those who aspire to be entrepreneurs, success is not guaranteed. Hence, entrepreneurship promotion is a job that requires detailed observation and continued support during the various stages of the entrepreneurial journey.  

One time intervention and misguided help may in fact do more harm than good in promoting entrepreneurship. One classic example is the case of doling out money with the intention of promoting entrepreneurship like the Government of Nepal did with Youth Self Employment Fund. Contrary to the popular belief, having easy access to finance may not promote entrepreneurship. In fact, easy money could easily kill the entrepreneurial spirit and creativity making the person dependent on donations. Despite spending huge amount of money, Youth Self Employment Fund barely had any impact in developing entrepreneurship in Nepal as a large volume of low interest loan was lent to speculative business instead of new ventures that create employment opportunities. Similarly, the notion in the development sector that entrepreneurship is equal to sum of accounting, technical skill and a team is also misguided. Entrepreneurship is always more than the sum of these various aspects. Besides uncertainty is always a constant factor in any entrepreneurial venture.

Hence, promoting entrepreneurs requires understanding the various aspects of an entrepreneurial journey and identifying at which an entrepreneur is and providing help accordingly. It is essential to shut up and listen to the entrepreneurs and understand the ground reality that an entrepreneur is operating in. As Sirolli points out in his popular TED speech, small scale entrepreneurs are generally besieged by lack of expertise required to delegate the major aspects of businesses and grow the business into another level. Entrepreneurs find it difficult to get support in these areas regardless of where they live and operate. The civil society organizations as well as the private organizations aspiring to develop entrepreneurship in Nepal should take heed of these lessons if they want to be effective in their efforts. 

Ensure Safety of Life and Property

Similarly, in the context of Nepal, various political and social problems pose a serious threat to the existence and growth of any enterprise. The security of life and property is so weak that people still hesitate to expose their success to the society for the fear of being extorted or attacked. It is a shameful thing that it is usually the political parties themselves who are involved in extortion and disruption of businesses. Frequent bandas and strikes pose another major problems for small scale entrepreneurs who face severe losses if the operation of their enterprises is disrupted even for a few days.

Lack of infrastructure and government’s apathy towards infrastructure development has resulted in increased cost of doing business for any enterprise regardless of its size. The increased cost of doing business usually affects the small and medium scale enterprises more than the large scale enterprises. Lack of infrastructure and rule of law also discourages the aspiring entrepreneurs from embarking into the entrepreneurial journey.

The government bears the ultimate responsibility in making the provision for the infrastructure development as well as maintenance of law and order. If the Government of Nepal wants to help thousands of entrepreneurial individuals across the country rather than just a few large scale enterprises, it should focus on developing infrastructures that ease up the cost of doing business and ensure safety of lives and property of its citizens so that more and more people are encouraged to dream big and make it big in the entrepreneurial journey.

(Published in The Himalayan Times- Perspectives of 14th September, 2014)

Aug 31, 2014

So You Registered a Company. Now What?

Legal compliance is not over with the company registration process. In fact, the legal complexities and burden for any entrepreneur just begin with the completion of the company registration process. The following chart lends a help to the already over burdened entrepreneurs on what compliance to follow after completing the registration process. Thanks to Venture Plus magazine for coming up with this infographic.

Click on the image to view its full size!


Jul 31, 2014

How to Help Developing Countries Effectively?

These days everything is getting smart. Beginning from our phones we are in an endless quest to smarten up every gadget we have been using in our daily lives. The quest has resulted in revolutionizing majority of the industries of the world by changing the way people interact with each other as well as the machineries. Unfortunately the same cannot be said of a few institutions and industry, most notably of the global aid industry. The global aid industry has been spewing billions of dollars for endless list of causes around the world. And yet, the effectiveness of aid in helping developing countries stand on their own has been debated again and again. Among the myriads of issues faced by developing countries what are the most important issues, which issues should be the priority for the development aid agencies? This is one question that has never been properly answered. Which issue gets the largest share of aid money at any point of time, seems to be determined by the hype and glamour the issue is commanding at the time.

In this context, Matt Ridley has come up with these five priorities for the development aid to focus on if they really want to make an impact to the developing countries. These five priorities are not based on his personal preference though. It makes economic sense to invest in these priorities as they have been found out to bring the highest return on per dollar spent on the cause. The priorities were determined based on the extensive cost benefit analysis done by The Copenhagen Consensus Center, an internationally reputed think tank.

According to Ridley, following are the issues rich countries should be spending aid money on if they really wanted to help poor countries:

1. Reduce malnutrition. When children get better food, they develop their brains, stay in school longer and end up becoming far more productive members of society. Every dollar spent to alleviate malnutrition brings $59 of benefits.

2. Tackle malaria and tuberculosis. These two diseases debilitate huge populations in poor countries, but they are largely preventable and curable. In the most harshly affected countries, two people often do one person’s work because one of them is sick. Benefit to cost ratio: 35 to 1.

3. Boost preprimary education, which costs little and has lifelong benefits by getting children started on learning. 30 to 1.

4. Provide universal access to sexual and reproductive health, which would save the lives of mothers and infants while enabling women to be more economically productive. It would also lower birthrates (when fewer children die, people have fewer children). Benefits could be as high as 150.

5. Expand free trade. This isn’t considered sexy in the development industry, and it may seem remote from humanitarian issues, but free trade often delivers phenomenal improvements to the welfare of the poor in surprisingly quick time, as the example of China has demonstrated in recent years. One of the discoveries of the Copenhagen Consensus process is that incremental goals such as expanding free trade are often better than supposedly “transformational” goals. A successful Doha Round of the World Trade Organization could deliver annual benefits of $3 trillion for the developing world by 2020, rising to $100 trillion by the end of the century.

You can read Ridely’s complete article at this link.

What do you think of these five priorities? One of the popular causes, climate change has not made it to the list. What is your opinion on it?

Jun 17, 2014

Who failed in the SLC exams? Students or the Government?


The Iron Gate has opened ajar. Only 43.9 percent students taking the School Leaving Certificate (SLC) exams made it through. As it happens every year, disappointing results come out, the education officials make a few apologetic remarks; the government promises yet another education plan with huge funding; public intellectuals berate private schools for their success and lament the inequality; people make consolatory remarks such as passing SLC is not everything; and after a week or two, the hue and cry dies and then it’s business as usual.

SLC may not tell much about the prospect of a student in life but it does tell a lot about the educational system. The pass percentage, despite relaxation of standards and cheatings allowed during exams, is embarrassingly low. If we segregate the SLC performance of public and private schools, a clear picture emerges which points out to the root of the problem. Ninety-three percent of students from private schools have passed the exams this year as compared to 28 percent from public schools. For the past four years, the pass rates for private educational institutions have been above 80 percent whereas the maximum pass rate for public schools was 46 percent in 2011. 

The problem is not with the whole educational system but with the public schools and the way they are run. Private educational institutions are doing just fine and in fact are the saving grace of our educational system.

Why such a disparity? Most people, like the Ministry of Education spokesperson, would be quick to point out higher investment in private schools as the reason behind better results. But there are many private schools with less investment than government schools and are yet doing much better. Consider Samata Siksha Niketan, popularly known as Bamboo School, which charges Rs 100 a month and yet achieves 100 percent result; or Melamchi Ghyang Secondary School in Helambu which has achieved glorious results despite being in a remote place and without much investment. It is also interesting to note that one of the toppers of this year’s exam, Sanjog Karki, comes from Reliance Academy in Kapan, a school catering to middle or lower middle class, and not from an elite school.

Upon being asked about their secret to success, many schools attribute it to good management and dedicated teachers, which are precisely the things lacking in public schools. Government school teachers are paid ranging from Rs 14,000 to Rs 31,000 whereas private school teachers generally get paid between Rs 5,000 to Rs 20,000. But these costs for government school teachers are just the tip of the iceberg. 

Lifelong pension after retirement and additional benefits for rural assignments comprise another major chunk of overall cost. It is important to note here that millions of dollars received in aid through government and non-government channels are also spent on public schools. And yet, the excuse government comes up with is lack of investment as if more investment in the past has done any better. A full 331 community and government run schools across the country had zero results this year. There is just no justifying that. 

Lack of a linkage between the performance of the school/teachers and the revenue they get is a more credible reason behind the poor performance of public schools. As news reports in the past have highlighted, teacher absenteeism is a major hurdle towards learning for pupils in public schools. We have had many news reports detailing how teachers of government schools are more interested in side jobs, political activities and protesting for permanency rather than teaching. Early at the start of the educational year, reports surfaced about millions of rupees allocated for textbooks being embezzled by school officials, and pupils were denied access to something as basic as textbooks.

Hence, the problem is neither with the overall educational system nor lack of investment in education but more with the incentive structure of the educational system. In fact, as much as a billion rupees is being spent on ‘fake’ schools, as reported in April 2014, using the same channel (the government) to invest more is completely ludicrous. 

One of the major flaws with the government-run schools is that the guardians never have a say on the revenue generation or rewarding of the school or the teachers which encourages them to neglect their responsibilities. Since the schools and the teachers generate their income from government rather than the guardians, they have very little, if any, incentive to heed the wishes of the children or their guardians. 

The first step towards reforming our educational system would be to change the incentive structure. The government should fund the students, not the schools. The government expenditure on education is for the sake of the children not for the sake of the schools or the teachers. Experimenting with the education voucher system being practiced in countries like India, Sweden and the US (as well as with charter schools) could be one way to restructure the incentive system. Similarly, encouraging and helping organizations like Teach for Nepal is important because they truly care for better education in the country. 

There are dozens of measures the government could take to lift public schools’ performance and set them at par with the private schools. Pouring more money into the existing structure is not one of them.

-Surath Giri

Jun 8, 2014

Luxury or necessity?

Google’s driverless cars are making headlines once again. These self-driving machines have logged more than 10,000 miles already without a single ticket and are being touted as the future of transport, at least for the developed world. Similarly, automatic drones which can be controlled by smart phones are revolutionizing industries ranging from online retails to pizza delivery through more effective and efficient transportation. 

On the other side of the world, however, we Nepalis are being forced to look at a simple four wheelers with wistful eyes. Thanks to the exorbitant rates of import duties and taxes the Government of Nepal levies on the import of automobiles categorizing them as luxury items, vehicles are out of the reach of the majority of Nepalis.
Nepal government levies 241 percent tax and duties on vehicle import. This is the highest imposition of tax on the automobiles in the world. As a result, when the world’s cheapest car Nano entered Nepal it was already seven times more expensive than it was in India, effectively out of reach for majority of Nepalis. As of April 2014, the number of vehicles registered in Nepal is only about 1.7 million which means our penetration of vehicle rate is just 5.67 percent of the population which is one of the lowest in the world. 

It is interesting to note that while the government thinks vehicles are luxury goods and not every Nepali should have access to them, the government officials and politicians ride on ultra expensive vehicles with taxpayers’ money. Hence, we have a scenario where only the rich, the government officials and the politicians can afford four wheelers. For the rest, the choice is between purchasing a two-wheeler with safety hazards and using the public transport which is not just unreliable but risky and costly if you consider the opportunity costs.

The usual justification given for the exorbitant taxes and duties is that it will minimize the use of private vehicles and thereby save environment, prevent congestion and save our foreign exchange reserves as the country has not been able to produce any vehicles of its own. The justification is true only as far as the theory goes. 

In practice, the question would be: Has the NRs. 11 billion plus revenue generated from the exorbitant import taxes, duties and road taxes and license fees translated into better roads, better public transport and better traffic management? Not exactly! In fact, it works the other way round. Because of the poor road conditions and unreliable public transport system more people are opting for private vehicles. Nepal could very well be the only country without a mass transit system in the world. The public transport run by cartels is as unreliable and as costly as things can become when impunity from both crime and competition is granted and ensured by the government.

Road construction is mired with corruption and government negligence in action. Roads are black-topped during the rainy season which last only for a few weeks before they are patched again. 

Because of the high taxes and the resulting increase in prices, primary medium of transport for many Nepalis, especially for those living in the cities, is two wheelers. Two wheelers are inherently less safe compared to other vehicles, resulting in more fatalities during accidents. The risk has been increased tremendously by the condition of roads and lack of traffic rule enforcement. As a result, we lose thousands of precious lives every year because people are compelled to ride unsafe vehicles. Roads are relatively safer for the rich but not for the poor because our government thinks safer and more comfortable vehicles are a luxury, not a necessity.
One of the concerns shared by the policymakers and general public with regards to lowering of import taxes is that it will encourage everyone to own vehicles and lead to high congestion in the roads. The fallacy stems from the trend of thinking of only cities and urban centers while designing national policies. 

The road network of the country does not even receive traffic enough to make them sustainable. Although road networks have connected all the 75 districts of the country, the actual utilization of the tracks is very low. The highest vehicle movement per day in Nepal is along Nepal-India borders which get 2500-3000 vehicles. On the other hand, most of our roads get only 300-1000 vehicles per day making it hard to sustain the regular maintenance and upgrade of these roads because of the low revenue generated from less traffic.

It is high time our policymakers rethought this policy of treating vehicles as a luxury item rather than as essential goods required for economic growth and development. Only when we make automobiles affordable in this country will the infrastructure development and its intended benefits materialize. But above all these concerns, the primary question we need to ask is: When the world is dreaming of affordable space travel why should we be denied access to something as basic as a four-wheeler?

- Surath Giri

May 21, 2014

How to Register a Company in Nepal?

Registering a business company in Nepal is not an easy process. In an attempt to make the process easier the Office of Company Registrar (OCR) made online company registration process mandatory in October 2013. As a result, Nepal has gone up three spots in the Doing Business Index (2014) ranking 105th among 189 global economies. But that does not mean, navigation of the bureaucratic processes and hassles has become easier. Following chart shows the company registration process in detail. I hope aspiring entrepreneurs in Nepal will find it useful. Please feel free to share the image among your friends and network.

Company Registration Process in Nepal