Manufacturing sector in Nepal is crucial for the country’s economic prosperity and the sector continues to be integral to the government’s growth priorities. According to the Nepal Investment Guide, 2018 published by Investment Board Nepal – with a population of around 28 million, rising disposable incomes, rapid urbanisation, untapped but growing rural markets, and favorable regulatory environment – Nepal possesses huge potential for FMCGs, which is growing at the rate of around 20% in an annual basis. Despite the impact of the pandemic, the sector still holds the huge potential to contribute to Nepal’s economic growth, given the constraints facing the sector are unlocked. A sectoral Skills Gap Analysis conducted by UKaid सीप in 2018 - 2019 reveals that skill-related challenges affected productivity and growth of 56% of the firm-level survey respondents, mainly the manufacturing industrialists. Typical examples of skills gaps that were highlighted by the respondents included lack of marketing knowledge; lack of skills in plant and machine operation; lack of communication skills; and lack of soft skills including critical thinking skills. The capacity of this sector to consume skilled workers in various job roles is abundant. 

With a mismatch of supply and demand, there is a growing appreciation of short-term skilling of workers among private players. To enable growth of the manufacturing sector, UKaid सीप has introduced apprenticeship-based skilling models, capacity building of instructors/master craft persons and developing industry-aligned curricula through its partnership with the public and private sectors in the light manufacturing domain. सीप, together with its partners, is reviving crucial manufacturing industries in Nepal by enabling increased availability of quality employment-linked and entrepreneurship-enabling skills. 

Through a partnership with Label STEP’s, a fair trade non-profit organisation committed to the wellbeing of weavers and workers in the handmade carpet industry, the programme is  helping revitalise  the once-thriving high-value carpet industry of Nepal by decentralising carpet manufacturing hub from Kathmandu to an underserved geographic area, mainly Sarlahi in Province 2 which that has traditionally served as the origin of Nepal’s weaving community. With investments and interventions from leading national and international carpet manufacturers and designers, since September 2019, this partnerships has helped establish eight fair-trade weaving workshops in Sarlahi where local women, primarily from migrant households and disadvantaged groups, and people with disabilities are skilled and recruited—using international-quality competency standard and industry-led skills training and certification to ensure availability of qualified and committed weavers. (View More...)

Revival of Palpali Dhaka industry is a top priority of the Lumbini Province Government and the Tansen Municipality. Through partnership with Palpali Dhaka Association (PDA)—an association of Dhaka enterprises formed in 2020, with catalytic support from UKaid SEEP, the programme is helping standardize the quality of Palpali Dhaka. Using a multi-stakeholder partnership approach, PDA is now producing finer quality handmade dhaka fabrics through stronger skilling practices at the firms alongside other essential, complementary industry growth-enabling interventions to support revival of the industry for sustainable job/self-employment creation and enterprise growth. (View More...)

Through a partnership with the Nepal Yarn Manufacturers’ Association (NYMA)—an association of yarn manufacturers in Nepal that promotes the interest of industries to expand production and export capacities; and integrates skillings to enable growth goals—we are strategically addressing skill gaps to meet industry workforce and productivity demands. Through our partnership, yarn industries under NYMA are not only leading to sustained job creation, but also a more inclusive and productive workforce—through improved infrastructure, standardized curricula, commitment towards safeguarding, and streamlined processes at the factories. Under this partnership, NYMA has also developed an industry-led curriculum to standardize five job roles being uniformly executed across the firms in the industry, including the introduction of soft skills that are equipping workers with interpersonal skills. (View More...)

The Nepal Government is taking various initiatives to support industrialisation by promoting investment in the manufacturing sector. Industrial Districts and Special Economic Zones (SEZ) have been created to ensure a competitive and investment friendly environment and to simplify administrative procedures. The Investment Board Nepal has broadly classified the viable areas for investment in the manufacturing sector into three sub sectors: Fast Moving Consumer Goods (FMCG); industrial goods; and consumer goods in manufacturing industries. These sub-sectors are already largely contributing to poverty alleviation by generating a large number of employment opportunities. But the sector starkly suffers from a stark shortage of skilled human resources that is able to cater to the needs of the market. Apart from the shortage of skilled workforce, limited transport infrastructure and connectivity and out-migration of skilled youth also create bottlenecks for the industry. 

Moreover, the coronavirus pandemic has led to a passivity in the consumer market, further aggravating the challenges faced by the sector. As per a sectoral analysis conducted by UKaid सीप in November 2020, in the initial lockdown in Nepal, the manufacturing industries operated produced only at a 15 to 25% of their production capacity, including even the essential food and pharmaceutical industries. But the production aced up by 60% after the first lockdown eased in September 2020. It is likely that the manufacturing sector will continue to fluctuate over the pandemic epoch. This has led to shortage in operating capital due to fluctuated transactions. However, the Government of Nepal’s FY 2021/22 budget has come with aid as the budget has sought to provide remedy to industries affected by Covid-19, by providing income tax exemptions from 50 to 90% based on the industry turnover rates.