Tall claims, poor execution

 Start-up support programmes

 

Kathmandu, July 2

For the past five years or so, the government has announced policies and programmes to support the start-ups in various ways in its annual budgets but their implementation has remained lackluster. None of the programmes and policies mentioned in the budget speeches were put into practice, thus they couldn't benefit any entrepreneur.

While the neighbouring countries including India, Bangladesh and China have devised favourable policies and strategies to support start-ups and paved the ways to create multiple unicorns or companies worth US$ 1 billion or more, Nepal has remained apathetic in this regard. India launched Start-Up India campaign a decade ago and the country is competing with western developed nations in terms of unicorns.

Nepal still doesn't have a policy and institutional setup to support the start-up business, laws to govern the sector, provision to attract crowd funding and business incubators to help the enterprises to thrive.

Every year, the budget keeps bringing some hopes to the entrepreneurs but ultimately leaves them disappointed as the government fails to impellent the programmes.

 

Budget provisions

FY 2018/19

Start-up support initiatives began with the budget of the Fiscal Year 2018/19. Then Finance Minister Dr. Yuba Raj Khatiwada had announced that he established a Challenge Fund to provide start-up capital for business initiated by entrepreneurs with innovative knowledge, skill and capacity. He had also announced a programme to provide loan of up to Rs. 700,000 with a 5 per cent subsidy in interst rate against the collateral of their academic certificates to encourage the youth with higher education to start their own businesses. The educational loan was implemented, though poorly.

FY 2019/20

Next year in 2019/20, FM Dr. Khatiwada made arrangements to exempt taxes, penalties, charges, fees and interest computable for the period prior to that year for entrepreneurs operating start-up businesses with innovative knowledge, skill, entrepreneurship and technology outside the tax net if they came into the Value Added Tax and income tax regime by mid-January 2020.

Dr. Khatiwada continued with the start-up support policies in his budget for the FY 2020/21 as well. He allocated Rs. 500 million to provide as start-up fund, to be lent at a 2 per cent interest rate in order to support and encourage the entrepreneurs willing to invest in innovative businesses by exploiting the 'exceptional business opportunities created by coronavirus'.

FY 2021/22

Likewise, in the budget of FY 2021/22, Finance Minister Bishnu Prasad Paudel announced to provide seed capital loan of up to Rs. 2.5 million at an interest rate of 1 per cent at project collateral. This programme was announced to motivate youth entrepreneurs to get involved in start-up business.

Paudel also said that he would establish a challenge fund to support start-up enterprises.

"I have arranged to provide free registration, renewal and other services for start-up business through one window system. Policy facilitation will be made to attract foreign investment in startup business. For this, I have set up a challenge fund of Rs. 1 billion," he said in the budget speech.

The budget of FY 2021/22 also gave 100 per cent income tax exemption to start-up business for five years from the date of commencement of the business. Minister Paudel also allowed private businesses to deduct their support of up to Rs. 100,000 to five startups as expenses while calculating the taxable income.

FY 2022/23

The budget of the current FY 2022/23 also has a couple of provisions for the start-ups. Finance Minister Janardan Sharma continued the previous programme of providing start-up capital for start-up business with the objectives of developing youth entrepreneurship and promote innovation. The government also promised to provide loans on the basis of projects.

"In such businesses, capital will be arranged through venture capital while study and research will be encouraged. Concessional credit will be provided by establishing a Challenge Fund to encourage businesses run by young entrepreneurs and returnee migrant workers," read the budget. It also pledged to establish a business incubation centre in Hetaunda Industrial Area in partnership with the private sector and expand the facility to other provinces as well.

FM Sharma went even further and announced to create an arrangement where large and medium enterprises would support the start-ups. He also announced to provide entrepreneurship training to 10,000 youth through the business incubation centres in collaboration with local governments, and banks and financial institutions.

 

Lack of implementation

Chairperson of the Startup and Innovation Forum at the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Juna Mathema, said that none of the provisions were implemented except some initiattions made to faciliatate start-ups through the Startup Enterprises Implementation Committee at the Department of Industry (DoI).

The committee has recently published a list of 173 enterprises that applied for the start-up loan facility. This is first of the successful programmes implemented by the government. Though there are bleak chances of this programme happening in the current year, spokesperson of the DoI, Ramila Bhandari, said that it would be implemented.

Accoriding to her, coordination among the various agencies including the Nepal Rastra Bank, Ministry of Finance (MoF) and Ministry of Industry, Commerce and Supplies (MoICS) had delayed the process.

In the past as well, the start-up support programmes had became the victim of the ping-pong among the MoF, MoICS and National Planning Commission (NPC). The NPC had even asked for the application for the start-up support programme but it couldn't be completed.

FNCCI's Mathema said that the private sector was happy for the fact that the governemtn at least acknowledged the start-up enterprises and hoped that the coming years could witness more support being levereged to them.

She attributed the failures to the lack of national policy on start-ups. Meanwhile, the government  has drafted a start-up policy that defines the start-up business, incubation centres and other related facilities.

"It is satisfactory that the federal as well as provincial governments have given greater attention to the promotion of start-up businesses. However, there should be a separate unit at the MoICS to support the startups," said Mathema.

She is hopeful that the new policy would streamline the programmes and activities announced to support the startups.

 

Future programmes

Meanwhile, for the next year, Finance Minister Dr. Prakash Sharan Mahat, has allocated Rs. 1.25 billion to develop start-up businesses. He announced that a start-up eco-system would be created to promote innovaiton and entrepreneurship. An incubation would be established and operated in Kathmandu to support in the realisation of entrepreneurial concepts.

Stating that the coming FY 2023/24 would be celebrated as the Youth Entrepreneurship Promotion Year, Dr. Mahat pledged easy access of startup and small enterprises to finance.

Meanwhile, the private sector companies and organisations have been organising start-up awards, incubation trainings and idea pitching programmes. 

Published in The Rising Nepal daily on 2 July 2023.