Sunday, March 21, 2010

3. EVOLUTION OF BUSINESS IN NEPAL

small business
As discussed earlier, the evolution of business in Nepal also can be divided into parts: (1) evolution of industry, and (2) evolution of commerce.

(1) Evolution of Industry in Nepal
Industrial development is the key to rapid economic progress of a country. Handicrafts and cottage industries have been in Nepal since ancient time, but industrial development is still in its infancy. Historically, the industrial development process began after with the establishment of Biratnagar Jute Mill. It was the first joint stock company of Nepal established under the Company Act, This act has been revised in 1957, 1964 and 1997 (2053 Chaitra). Nepal Bank Limited was established in 1937 for the development and growth of industry and trade.

In between 1936 and 1949 a number of industries, particularly in the fields of cotton textile, sugar match, hydropower, rice and oil mills, and cigarettes were set up in the south eastern and eastern Terai region. Between 1945 and 1949, the prevailing war-time inflatory conditions and scarcity of goods in the market provided a rare opportunity to these enterprises to make high profits. After the Second World War, the demand for the goods produced in Nepal went into decline along with the profits which resulted fall in confidence in industries and shutdowns.

The total number of public limited companies and proprietorship firms registered before 1950 reached the figures of 59 and 299 respectively.

In Nepal, development plans were implemented only from 1956 (2013 B.S.). The First Five-Year Plan was implemented in 1956-61. In order to encourage and assist the development of private industry, an Industrial Development Centre was established in 1957 which was converted to Nepal Industrial Development Corporation in 1959.In the same year, Nepal Factory and Factory Workers Act was also passed to allow industrial development. In the plan period Private Firm Registration Act, 1957 and Industrial Policy, 1960 was announced. Balaju Industrial District was also established in the plan period.

In the Second Three Year Plan (1962-65) eleven public enterprises were established i.e. Birgunj Sugar Factory, Janakpur Cigarette Factory, etc. In the private sector sugar, metal, handicraft, hotel, soap, biscuit and sweets industries, etc. were established. Patan and Hetauda Industrial Estates were established in the plan period.

The Third Five Year Plan (1965-70) recognized industrialization as an essential component of economic growth and gave it third priority. In this plan period, Bansbari Leather and Shoe Factory, Agriculture Tools Factory, Himal Cement Company, Nepal Tea Development Corporation, Dairy Development Corporation, were established.

The Fourth, Fifth, Sixth, Seventh and Eighth Five Year Plans also emphasized the need to attract private sector investment in industries.

During Eight plan HMG adopted privatization, economic liberalization and open market policies. Keeping in mind the condition of public enterprises, HMG initiated privatization efforts from the Eighth Plan. The new revised industrial policy (1992) has been greatly liberalized and made transparent. Foreign Investment and Technology Transfer Act (B.S. 2050) was reviewed to attract foreign investment and to emphasize the transfer of advanced technology and efficient management. The Ninth plan (1997-2001) continued to emphasize on privatization and economic liberalization. The core objectives of the Tenth plan (2002-2007) is participation or private sector and to create additional employment in both rural and urban areas to reduce poverty.

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