NICCI recommends policy for contract manufacturing

Kathmandu, Feb. 3

Nepal India Chambers of Commerce and Industry (NICCI) has recommended the government to create policy framework to facilitate contract manufacturing in industrial sector so that Indian industries would expand their product base in Nepal.  

“If the government creates a policy for contract manufacturing and facilitates the process, there are high chances of Indian manufactures hiring Nepali companies to produce their goods, at least for the Nepali market,” a delegation of NICCI said in a meeting with the Director General of the Department of Industry (DoI), Ram Chandra Tiwari on Thursday.

Contract manufacturing is a process where a company hires another company to produce goods for it.

Since goods could be produced at a cheaper rate in Nepal due to lower transportation cost and cheap labour, Nepal could be a good choice for the Indian manufacturer. It will also help Nepali manufacturing companies to sustain and create jobs, NICCI said in a statement.

It also hoped that contract manufacturing could also help to enhance the capacity of Nepali industries as they would learn the know-how of international standard goods, and transfer world-class technology and quality.

However, there are some challenges in attracting Foreign Direct Investment (FDI) and reforms in the laws are essential.

“Many Indian and foreign companies in Nepal are facing constraints while registering their trademarks and copyrights. Therefore, Patent Design and Trademark Act, 1965, Foreign Investment and Technology Transfer Act, 2018, and Industrial Enterprise Act, 2018 should be amended as per the international practices,” said Saibal Ghosh, Vice President of the association.

He also urged the DG Tiwari to facilitate in policy provision to allow the companies with Indian investment to import small amount of goods – that are not possible to produce in Nepal due to small market – to sell and distribute in the market in order to test the product.

President of NICCI, Shreejana Rana, urged the DoI to make its role more impactful in simplifying the rules in order to support the industrial growth in the country.

Another VP of the association, Sunil KC, suggested change in the limit for the minimum investment for the foreign investors to Rs. 10 million from the existing Rs. 50 million in information and technology as well as small and medium enterprise sector.

“Nepal needs to attract Indian companies as it did during the 1990s when companies like Dabur, Unilever and Surya Nepal entered the country and are doing well so far,” he said.

According to him, the government should establish an FDI Revival Committee including the representatives from the private sector.

In response, Tiwari said that although the department had implemented some reforms recently such as one door system for the investors, it was not enough. According to NICCI, he is positive to establish Nepal Innovation Centre to promote youth entrepreneurship. 

Published in The Rising Nepal daily on 4 February 2022.