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

May 20, 2014

Entrepreneurship Education : Need of the Hour

Imagine this classroom scenario. The teacher asks the students, “What do you want to be in the future?” Bright students in the class reply, “I will become a doctor or an engineer or a pilot.” Others usually say that they want to join the army. The rest have no clue as to what the answer would be. This scenario is likely to have occurred in every classroom of Nepal regardless of time and location.

Our education system so far has been focused on making students employable once they graduate. Whether it has been able to meet the objective is debatable. However, our education system has definitely been unable to develop entrepreneurs who will create jobs that most students will aspire to get later on. As a result, out of the 450,000 young people who enter the job market every year, only a handful get employment opportunities. Most of the remaining leaves the country seeking employment opportunities. 

It can be argued that in our context, level of education is in fact inversely proportional to the chances of the person being employed and doing something productive. The prestige associated with formal education vis-a-vis lack of dignity of labor makes it difficult for an educated person to engage in menial or traditional jobs. At the same time, proper jobs are hard to come by as country is reeling under political instability and mismanagement for decades. Hence, an educated person finds himself/herself in a precarious position of having an education but limited job choices. Therefore, it is not uncommon to find a person who has multiple degrees and is yet jobless.

While we continue to struggle with the inadequacies in our system, the world has been changing at an unprecedented speed. Thanks to the rise of information communication technology and globalization, jobs and industries are transforming and disrupting the status quo like never before. Consider this! Some of the most popular jobs today like smart-phone apps developer and social media expert did not exist until a decade ago. The phenomenon, however, is not limited to information technology field. Jobs like sustainability expert too were not in the mainstream until a decade ago. And many jobs that existed a decade back do not exist today. 

This means that education alone does not ensure meeting the needs of the market. Having students graduate without skills to adapt to the latest market demands is becoming a major issue for developed societies as well. Therefore, the major question today is not whether students have the right set of skills and abilities but whether they are entrepreneurial enough and can adapt to the changing environment. The question is about whether we are creating entrepreneurs or just job seekers. Nepal is in dire need of the former.

In this context, it is high time that we in Nepal include entrepreneurship in our educational curriculum from the school level itself. If we start teaching students about employment skills from an early age why don’t we start teaching them to think entrepreneurially from an early age? When we teach them about Malla Kings and Lichchhavi Kings why not teach them how Nepal was a nation of entrepreneurs and how our historical monuments stand to bear the fact that once we were very prosperous and entrepreneurial. While we tell them that Nepal is home to eight of the ten highest peaks in the world, why not tell them about the immense opportunities of entrepreneurship in the tourism field. Showing them the opportunities while they are young will probably help us counter the pessimistic mindset that seems to have been infesting our nation till date.

Instilling entrepreneurial mindset among the pupils will not be enough. It is also necessary to introduce them to workings of a market and the role of an entrepreneur. This can be achieved by involving students to run small scale enterprises on their own. It can also be achieved by adding entrepreneurial components like profit-making, revenue generation and sustainability to the existing projects related to different subjects such as environment studies or social studies. 

The success of student entrepreneur groups such as Enactus and Students for Advancement of Global Entrepreneurship around the world in creating entrepreneurs out of high school students shows how entrepreneurship is the solution to not only our economic but also our social problems. These two groups have been teaching entrepreneurship to high school students and encouraging them to start their own ventures which could be either profit-making or social enterprise while they are in school.

Teaching entrepreneurship to our future generation while they are young is the need of the hour for Nepal. It could be the surest and the most sustainable way to seeing a reduction in the length of lines of migrant workers waiting for their flight to foreign countries at Tribhuvan International Airport. It could also be an effective way of countering the myriads of social problems that besiege us.

-Surath Giri

May 11, 2014

Proposed Foreign Investment Policy 2014: Is that what we need?

Ministry of Industry has recently come up with the draft of the new proposed Foreign Investment Policy 2014 whose lack of common sense has surprised even the most ardent believers of bureaucracy in Nepal. Notwithstanding the fact that countries around the world, especially the ones lacking capital, are courting foreign investors for capital and technology to spearhead their economic growth, Nepal’s attitude seems to be that of a nation who already has too much of an investment and can afford to be selective in choosing investors. The policy is an example of how our bureaucracy is so out of touch with reality. A few provisions proposed by the policy will prove this assertion.

One of the provisions made by this policy is to ban foreign investments of less than 200,000 US Dollars which is a four-fold increase from the existing floor of 50,000 US Dollars. The policy also bans foreign investments on hydro power projects of less than 30 Mega Watts and less than 3 star hotels. It is difficult to understand why the government wants to dissuade small scale investments and investments in smaller hydro power projects as well as smaller tourism establishments when it is already among the countries with least amount of foreign direct investment in the world. As of February 2014, the total foreign investment in Nepal is valued at around US $1.14 billion from 78 countries which is very low compared to not only its huge neighbors but even compared to other economies in the region. Sri Lanka attracted US $870 million as foreign investment in 2013 alone whereas Pakistan received about US $ 1.4 billion during the same period.

Putting a minimum floor on foreign investment not only decreases the amount of foreign investment coming to the country but also helps concentrate those investments towards larger businesses and industries only. This increases the possibility of undue influence among policy makers and government officials by the few large scale investors among. Such a floor also prevents foreign investment and technology transfer in small and medium scale enterprises whose capital requirements are lower compared to their labor requirements such as restaurants, tourism agencies and information technology companies. Majority of the IT companies in Nepal are small and medium enterprises requiring investments much lesser than the minimum floor proposed by the policy. Implementation of such policy would eventually result in elimination of small scale IT companies who have been providing large number of lucrative employment opportunities to Nepalese IT professionals.

Similarly, the provision of not allowing foreign investment in hydro powers of less than 30 Mega Watts will bring nothing more than harm to the economy. The cost of production for one mega watt of hydro electricity ranges from 150 to 180 million Nepalese rupees which is unlikely to be raised from Nepalese investors alone. On the tourism sector too, what we need is more innovations in more destinations rather than large scale investments in already crowded sectors and activities. 

Big Contradictions

Hence, the prudent step for the government would be to encourage more small scale foreign investments not discourage them.Some government officials have been quoted as saying that the minimum floor of investment is needed to prevent some foreigners from opening up small scale enterprises and using such investments as a reason to keep staying in Nepal. One would wonder what the problem in that is. On one hand, Nepal is trying to attract a million plus tourists in Nepal. On the other hand, government does not want these people to make small scale investment and use it as a reason to stay in Nepal. It is definitely hard to find logic in these contradictory approaches. 

And if foreigners staying in Nepal using small scale investment to their advantage is a problem then isn’t it a problem of department of immigration? Banning all the small scale investments just because some foreigners are “misusing” them is tantamount to throwing the baby out with the bathwater. 

Another provision in the policy that raises huge concern is the formation of Foreign Investment Promotion Council. The council, per se, would be a positive step towards facilitating the investment process in Nepal but the way it is staffed raises concern. The council is supposed to be chaired by Minister of Industry and consist of representatives of more than 12 government agencies. Since the membership is so diverse and the council duties are not among the priority for the officials, the council is likely to never convene or be efficient enough for making decisions which will ultimately end up leaving investment processes in limbo.

What next then?

With all these clauses, the new proposed Foreign Investment Policy 2014 is more likely to do more harm than good to the Nepalese economy and can be considered a regressive policy when compared to the existing foreign investment policy. The right thing to do for a developing economy like Nepal, is to attract as much investment (both local and foreign) as possible not discourage them. In this era of globalization, too many countries are courting foreign investments and we cannot afford to be choosy with regards to investment. The best policy for Nepal would be to welcome any investor with any amount of money who is willing to create jobs and prosperity for our citizens. It is imperative that policy makers understand this reality and revise the policy accordingly.

-Surath Giri