Wednesday, May 25, 2022

Industrial innovation still remains a far cry in Nepal

Kathmandu, May 21

While the world was under the grip of COVID-19 pandemic and it was putting its efforts to develop vaccines and other medicines to prevent the contagion, Deurali Janta Pharmaceutical (DJPL) in Nepal had begun research for the development of a vaccine against the coronavirus. But the government processes in research and development, and procurement of biochemicals and consulting service from abroad posed so many hurdles that the company abandoned the activity mid-way.

Scientists at the Nepal Academy of Science and Technology (NAST) successfully developed a prototype of oxygen cylinder in May 2021 by using local products. Although the cylinders manufactured by NAST could bear three-time more pressure than it should, it couldn't go for the industrial production yet.

These two incidents hint at the poor status of innovation in the country.

Nepal lacks innovation in all three major sectors of the economy – agriculture, industry and service - while the industry is the one that suffered the most from it. In the last decade after the conclusion of the peace process, the industrial sector growth remained stagnant with about 14 per cent contribution to the economy while service sector expanded by 10 per cent to reach 62 per cent and agriculture sector shrunk by 10 per cent from about 35 per cent. Industrialists say that the sector not only failed in making innovations but also in transferring significant technology that could disrupt the production process.

Likewise, only one patent and 31 designs were registered at the Department of Industry (DoI) in nine months of the current fiscal year 2021/22 while no patent and 23 designs were registered in the previous year. Probably, the registration of only 79 patents in Nepal so far shows the pathetic condition of industrial development and innovation here.

On the contrary, local businessmen have registered the trademarks of some of the global brands in their name and created hurdles for the companies in branding and promotion. Kansai Nerolac Paint is one such case where the original producer is selling its product with a new name 'KNP' while a local trader has the original name.

 

Lack of innovative climate

Former President of Confederation of Nepalese Industries (CNI) and Executive Director of DJPL, Hari Bhakta Sharma, said that the country lacks favourable environment for research and innovation. Laws related to intellectual property rights, land use and industrial enterprise do not incentivise innovation while the governments have been paying lip service to the promotion of research and development, he said.

According to Sharma, Nepal could have competitive advantage in information and communication technology, bio-tech and academia but it needs a policy regime that promotes risk-taking and innovative capacities in the entrepreneurs.

It is not easy to attract foreign innovators by a private sector industry since there is a cumbersome process and reverse taxation on such experts which means they have to pay 13 per cent Value Added Tax and 15 per cent TDS. Industries that are running at a thin margin of profits and struggling to overcome the impacts of earthquake, economic blockade and a pandemic can't afford to expend a large sum to hire them.

Meanwhile, a sad part of it is that trading is safe and manufacturing is risky which is made riskier by policies in Nepal, said Sharma. Industries have to worry about the management of land, human resources, environment and external sector pressure which lacks innovative thinking.

FDI helps technology transfer

However, Director General of the DoI, Ramchandra Tiwari, said that the industries with Foreign Direct Investment (FDI) have supported in the transfer of the latest technology to Nepal. "FDI does not only bring the funds but also the technology," he said.

In the nine months of this fiscal, DoI has received the commitment of Rs. 26.14 billion which is less than the pledge of Rs. 33.42 billion made in the same period of previous year. Specially,  large industries with FDI have major role in innovation and technology transfer but of the total 142 companies with foreign investment, only three are large and three are medium enterprises, according to the DoI.

Industry-academia tie-up

A tie-up between the industry and academia in Nepal is almost non-existent although some efforts are made recently by the NAST and Kathmandu University while Pokhara University has introduced a new course on innovation and entrepreneurship in collaboration with the Ministry of Industry, Commerce and Supplies (MoICS).

While all stakeholders have agreed that innovation centres should be established at the universities and joint efforts should be put into it by the private sector and the government, the public-private cooperation is limited to internship and job placement. But National Science, Technology and Innovation Policy formulated in 2019 pledged to create a conducive environment for the engagement of academic institution and private sector in research, technology development and innovation.

Similarly, cooperation between the DoI and NAST is not rigorous and result oriented, it is limited to discussions and interactions.

As a result, startups are not getting the support they require to flourish in the current business environment in the country. The budget of FY 2021/22 announced free company registration, renewal and tax discount for startups, Rs. 2.5 million loan at 1 per cent interest, non-collateral loan for small and medium enterprises, commercial agriculture, women entrepreneurs and returnee migrant workers, its implementation is not encouraging. Likewise, the challenge fund of Rs. 1 billion set up to help new entrepreneurs has also been largely unused.

The Economist said in a recent report that the enterprises are immensely benefitted from the proximity to brain trusts.

Meanwhile, Chief of the Faculty of Technology at the NAST, Dr. Rabindra Prasad Dhakal, said that there were preliminary discussions between the science body and MoICS for cooperation.

Likewise, NAST is partnering with the Gandaki Province government to establish a bio-char industry in public-private partnership model there. A feasibility study for the production of electric scooter is being conducted in Lumbini province as well.

Similarly, the KU has established an innovation centre for business innovation and incubation and is running an idea studio to support in business management. According to Dr. Biraj Singh Thapa, Associate Professor of Department of Mechanical Engineering at the KU, the university is also running Energize Nepal Project to create industry-university link. It offers funding to the students with innovative business ideas jointly with the industry.

"We offer competitive grants to the students. The programme has also partnered with other universities and institutions like the Tribhuvan University's Institute of Engineering," said Dr. Thapa.

 

 

 

Innovation Centre seeks producers

The National Innovation Centre (NIC) has successfully tested and developed prototype of multiple products including e-vehicles, solar drier, baby warmer, coffee roaster, corn roaster and tea drier. But apart from a couple of innovations like baby warmer and solar drier, many of them are yet to find an industrial producer.

Chairperson of the NIC, Mahabir Pun, said that no industry has approached the NIC for any innovation. "If the research is conducted in Nepal for mechanical innovation, it would reduce the cost and there could be timely maintenance of such facility as well," said Dr. Pun. "But Nepali factories import the technology and machines. It seems they do not have faith in indigenous idea and technology."

According to him, there is no operational tie-up between NIC and NAST although both the institutions are working in the areas of invention and innovation.  He said that the NIC wants to forge collaboration and cooperation with the private sector producers and businesses.

 

Innovation policy

Countries like Singapore have created startup policies and implement scheme to attract domestic and foreign youth with innovative ideas.

The National Science, Technology and Innovation Policy, 2019 was formulated with the aim to develop entrepreneurship and increase production by efficient utilisation of means of production, modernization of agriculture and industrial infrastructure development, development of production-oriented entrepreneurship through the adoption of emerging and cutting-edge technology.

Through this policy the government has assimilated that the country doesn't have environment for the development of scientific research and technology development, cooperation and partnership among the stakeholders including the private sector, legal provision for the operation and management of research institutions, and link between the research by the academia and commercial production.

The lack of innovation and technology transfer has repercussions on industrial growth, reduction of production cost, increment in the productivity and competitiveness of Nepali products in the international markets. According to the private sector stakeholders, the delay in promoting research and innovation to support business and industry will cause further deterioration in industrial production and growth.

Published in The Rising Nepal daily on 22 May 2022. 

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