Data Collection and Confirmation Study on Private Sector Development in Nepal
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Data Collection and Confirmation Study on Private Sector Development in Nepal FINAL REPORT March 2013 JAPAN INTERNATIONAL COOPERATION AGENCY UNICO INTERNATIONAL CORPORATION 4R JR 13-022 Data Collection and Confirmation Study on Private Sector Development in Nepal FINAL REPORT March 2013 JAPAN INTERNATIONAL COOPERATION AGENCY UNICO INTERNATIONAL CORPORATION Table of Contents Introduction Summary of Recommendation Chapter 1 Socioeconomic Conditions in Nepal 1.1 General Background ................................................................................................... 1-1 1.1.1 Current Status ..................................................................................................... 1-1 1.1.2 Central and Local Government Organizations ................................................... 1-5 1.1.3 Educational System and the Current State of Education .................................... 1-8 1.2 Economic and Social Conditions ............................................................................. 1-11 1.2.1 Macroeconomic Trend ..................................................................................... 1-11 1.2.2 Changes in Industrial Structure ........................................................................ 1-12 1.2.3 Labor Market and Social Development ............................................................ 1-14 1.3 Issues identified from Macroeconomic Indicators ................................................... 1-20 1.3.1 Macroeconomic and Development Issues ........................................................ 1-20 Chapter 2 Economic and Industrial Policies 2.1 National Economic Development Plans ..................................................................... 2-1 2.1.1 Historical Background and Current State of National Economic Development Planning ....................................................................................... 2-1 2.1.2 Role of National Planning Commission ............................................................. 2-2 2.1.3 General Outline of the Three-year Plan (2009/10 – 2012/13) and Development Policy for Key Sectors ................................................................. 2-3 2.1.4 Immediate Action Plan on Economic Development and Prosperity .................. 2-6 2.1.5 Immediate Economic Development Action Plan by FNCCI .............................. 2-7 2.2 Government Finance and Budget ............................................................................... 2-9 2.2.1 General Outline of Government Revenues and Expenditures ............................ 2-9 2.2.2 Local Government Finance .............................................................................. 2-10 2.2.3 Issues relating to Improvement of Central and Local Government Finance .... 2-12 2.3 Industrial Policy and Implementation System .......................................................... 2-14 2.3.1 Industrial Policy Framework ............................................................................ 2-14 2.3.2 Policy Implementation System ......................................................................... 2-15 2.3.3 Function and Role of Economic Organizations ................................................ 2-24 2.4 Current State of Economic Cooperation Agreements .............................................. 2-28 2.4.1 WTO membership ............................................................................................ 2-28 2.4.2 Multilateral and Regional Trade Agreements .................................................. 2-28 i 2.4.3 Bilateral Trade Agreements .............................................................................. 2-29 2.5 Current State of Development Assistance and Support by International Donor Organizations ................................................................................................ 2-31 2.5.1 Assistance and Support by Multinational Organizations ................................. 2-31 2.5.2 Bilateral Support............................................................................................... 2-35 2.6 Major Issues relating to Industrial Policy ................................................................. 2-41 2.6.1 Issues relating to Industrial Policies and Programs .......................................... 2-41 Chapter 3 Outline and Analysis of Industrial Sector 3.1 Agriculture ................................................................................................................. 3-1 3.1.1 General Background ........................................................................................... 3-1 3.1.2 Agricultural Policy ........................................................................................... 3-23 3.1.3 Issues in the Agricultural Sector....................................................................... 3-27 3.2 Mining Sector ........................................................................................................... 3-30 3.2.1 Current State ..................................................................................................... 3-30 3.2.2 Mineral Sector Policy ....................................................................................... 3-34 3.2.3 Mineral Sector Development Issues ................................................................. 3-35 3.3 Industrial Sector ....................................................................................................... 3-36 3.3.1 General Outline of the Industrial Sector ........................................................... 3-36 3.3.2 Industrial Policy ............................................................................................... 3-51 3.3.3 Issues relating to Development of the Manufacturing Sector .......................... 3-61 3.4 Tourism .................................................................................................................... 3-65 3.4.1 Current State ..................................................................................................... 3-65 3.4.2 Tourism Promotion Policy ............................................................................... 3-72 3.4.3 Current State of Tourism Development and Major Issues ............................... 3-74 3.5 Financial Sector ........................................................................................................ 3-77 3.5.1 General Background ......................................................................................... 3-77 3.5.2 Comparative Advantage of Financial Institutions and Bottlenecks ................. 3-82 3.5.3 Issues relating to Development of the Financial Sector ................................... 3-83 3.6 Local Industries in Nepal ......................................................................................... 3-86 3.6.1 Current State of Local Industries ...................................................................... 3-86 3.6.2 Policies and Programs Relating to Local Industry Development ..................... 3-92 3.6.3 Issues Relating to Local Industry Development ............................................... 3-95 Chapter 4 Outline of Nepal’s International Trade 4.1 Past Trend ................................................................................................................... 4-1 ii 4.1.1 Export Trend in terms of Items .......................................................................... 4-3 4.1.2 Import Trend....................................................................................................... 4-7 4.2 Promotion of International Trade and Major Issues ................................................. 4-10 4.2.1 Policies and Programs relating to Trade Promotion ......................................... 4-10 4.2.2 Nepal’s International Trade System and Custom Clearance Procedures ......... 4-15 4.3 Trade Promotion System and Human Resource ....................................................... 4-19 4.3.1 Systems and Institutions for International Trade Promotion ............................ 4-19 4.4 Issues Relating to Trade Promotion ......................................................................... 4-21 4.4.1 Major Issues ..................................................................................................... 4-21 Chapter 5 Current State of Investment in Nepal 5.1 Investment Trend ........................................................................................................ 5-1 5.1.1 Recent Trend ...................................................................................................... 5-1 5.2 Investment Climate and Policy ................................................................................... 5-8 5.2.1 Investment Promotion Policy and Procedure ..................................................... 5-8 5.2.2 Investment Climate in terms of Global Ranking .............................................. 5-11 5.3 Investment Promotion System and Human Resources ............................................. 5-14 5.3.1 Investment Promotion System .......................................................................... 5-14 5.3.2 Human Resources relating to Investment Promotion ....................................... 5-14 5.4 Issues relating to Investment Promotion .................................................................. 5-17 Chapter 6 Prospective Industries from Perspectives of the Indian Market 6.1 Current State of the Economy in Northern India .......................................................