Improving the Environment for Entrepreneurship in Nepal

Introduction

In 2006, Nepal emerged from a decade long insurgency and centuries-old monarchical governance. The country was undergoing a transition to democracy, characterized by elections and the adoption of a new constitution. Recognizing an opening in this new political context Samriddhi, The Prosperity Foundation was established to start a discourse on issues and agendas that help democracy deliver – a component that has been largely missing during past democratic transitions.

Samriddhi focused on expanding people’s access to economic opportunities primarily through the promotion of entrepreneurship, economic policy reform and improvement of the business environment. In order to strengthen the environment for entrepreneurship, Samriddhi employed a two-pronged approach. First, Samriddhi’s Arthalaya School of Economics and Entrepreneurship program educated and trained hundreds of aspiring university students on topics such as markets and policies and offered participants an opportunity to gain practical entrepreneurial skills. Second, Samriddhi’s initiatives known as the Nepal Economic Growth Agenda (NEGA) aimed to improve the policy environment for entrepreneurship.

Equipping Entrepreneurs with Skills and Know-How: Arthalaya School of Economics and Entrepreneurship

In order to improve the overall environment for entrepreneurship, Samriddhi recognized the need for educational programs that teach practical skills to aspiring business owners. An important element in furthering democratic and economic reforms is educating youth about the meaning of democracy and markets. Young people are a key demographic to target with training and educational programs because the future of freedom depends on the younger generation. In Nepal, the majority of the population is under the age of 35 and the educational system is based on outmoded Soviet economics.

Samriddhi carried out education programs that target young people and bring them closer to the policy debate taking place in mainstream political-economic discourse. The Prosperity Foundation conducted youth training programs through the Arthalaya School of Economics and Entrepreneurship in partnership with the Center for International Private Enterprise (CIPE). The training programs consist of five day workshops that promote the spirit and skills of entrepreneurship and familiarize young people with concepts related to economic freedom and policy regime.

The main purpose of the program is to help university students explore alternative ideas for addressing Nepal’s existing problems, emphasize the value of entrepreneurship, and help aspiring entrepreneurs open their own businesses. Students gain practical entrepreneurship skills through participation in mock business competitions. Topics covered in the workshop curriculum include rule of law and the business environment, incentive systems and human resource management, policy watch on government and markets, how markets function, the role of government in business, and leadership skills necessary to set up a business. Guest speakers, who are primarily entrepreneurs and businessmen, attend the Arthalaya workshops and speak about their personal experiences in business while also addressing technical topics related to economics and business.

So far, over four hundred university level students have attended the program and have learnt about entrepreneurship, wealth creation, and economic freedom. More than two dozen students have started their own ventures and have become entrepreneurs and many are involved in actively promoting entrepreneurship in their schools and communities through activities such as writing blogs and articles and opening entrepreneurs clubs in their colleges. More than twenty such entrepreneurship clubs have been brought into existence by Arthalaya graduates who organize l activities to inspire their friends to become entrepreneurs and to promote networking and capacity building.

Influencing the Policy Environment for Entrepreneurship: The Nepal Economic Growth Agenda

Improving the environment for entrepreneurship in Nepal requires influencing the economic policy reform process through an emphasis on free market and democratic principles. Samriddhi undertook such an initiative known as the Nepal Economic Growth Agenda in 2011 in partnership with the Center for International Private Enterprise (CIPE) and the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). The Nepal Economic Growth Agenda (NEGA) is an annual effort to identify short-term as well as long-term policy bottlenecks that hinder Nepal’s economic growth. The initiative aims to bring attention to priority agendas and practical steps that could be taken to spearhead Nepal’s economic growth. Since the release of the first NEGA report and studies in 2012, a number of Samriddhi’s recommendations have been taken up by the government through commitments in public forums and the annual budgetary announcement.

The Nepalese authorities have responded favorably to Samriddhi’s recommendations in the areas of agriculture, hydropower development, tourism, the national budget, and foreign investment. Notably, 10 of the 17 policy recommendations have been adopted by the government.

• Samriddhi’s research on hydropower development had a strong impact on government policies with the signing of the “Common Minimum Agenda for Hydropower Development” by all political parties and the commitment of the authorities to build transmission lines by 2018 for six major hydropower projects.
• To improve tourism, NEGA recommended opening additional peaks for climbers, and the government recently agreed to open 23 peaks. The authorities also allocated funds for developing infrastructure for tourism in several remote areas of the country, covering all so-called “Development Regions.” These investments will improve tourism products, services, infrastructure, and facilities as well as increase tourist flows and state revenue.
• The Nepalese government agreed with the NEGA recommendation to allocate 1.45 billion rupees ($14.5 million) for a commercialization of agriculture and trade project, to improve agriculture production, processing, and marketing.
• Samriddhi successfully argued against a proposed provision, which set a minimum threshold on foreign direct investment. The proposed Foreign Investment and Technology Transfer Act would have severely affected small scale investment, particularly in the IT sector.
• Samriddhi actively advised the Nepalese government on the preparation of the annual budget and the final document contained approximately a dozen points that closely reflect the proposed recommendations.

With CIPE’s assistance, Samriddhi developed a series of six policy papers on so-called “cross-cutting” economic policy issues that affect the implementation of the Nepal Economic Growth Agenda. The papers covered state-owned enterprise reform, competitiveness, foreign direct investment, industrial relations, contract enforcement, and improving the business climate. Samriddhi produced these papers after extensive research by its own team, as well as consultation with various policy experts, academics, and business leaders. Samriddhi’s economic research has become an important source of independent policy analysis in Nepal.

Following NEGA’s success, Samriddhi was recently approached to be a knowledge partner in a reform oriented national economic summit organized by the Government of Nepal and the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). Samriddhi played an integral part in shaping the reform agenda for promoting investment in Nepal. The Prosperity Foundation worked with the government and key stakeholders in the agriculture, energy, and tourism sectors for three months to identify key challenges in the sectors and come up with recommendations.

With the declaration “A Commitment to Economic Reform,” the government pledged to improve entry and exit procedures, improve its performance in the Doing Business indicators, and eliminate unnecessary regulatory processes (starting with the agriculture, tourism, and energy sectors). This initiative is one of several examples demonstrating Samriddhi’s important role in Nepal’s policy reform process.

Conclusion

In a short period of time, Samriddhi has made a successful transition from an organization primarily focused on youth entrepreneurship training programs to a leading voice providing independent input into the policy process in Nepal’s challenging landscape. Samriddhi’s overarching goal has been to improve the environment for entrepreneurs through the adoption of a two-pronged approach.

First, Samriddhi focused on educating youth on the virtues of entrepreneurship and equipping students with the necessary knowledge and skills to understand how markets function, the role of government in regulating business activities, and how to start their own ventures. To date, over four hundred university students have attended the Arthalaya program. Engaging young people is a critical step in improving the public’s understanding and acceptance of market and democratic values.

Second, Samriddhi undertook the Nepal Economic Growth Agenda initiative with the objective of improving the economic policy environment by identifying key challenges to entrepreneurship and providing recommendations to address them. In doing so, Samriddhi’s efforts are helping to ensure that Nepal’s democracy delivers economic opportunities to all of the county’s citizens.

This case study was published in CIPE’s “Strategies for Policy Reform Volume 3: Case Studies in Achieving Democracy That Delivers Through Better Governance,” click through to download and read more.