Growth potential

  • Agro sector has enough room for growth to absorb remittance money as investment and the youth as entrepreneurs and labour

Feb 27, 2018-

Perhaps if we marketed a strong business case for Nepali youth in agriculture, and showcased examples of farmer millionaires, we could gradually charm our way into a sustainable revolution within a single generational shift. This, all the while stimulating the most basic stage of economic development in the country. There’s plenty of other reasons why now is the best time to be thinking about this.

Not just the mainstay of our economy, agriculture for the youth around the world is the new cool. Young innovators want to literally get their hands dirty more than ever before. According to the Washington Post, for only the second time in the last century, the number of farmers under 35 years of age is increasing. And 69 percent of the young farmers who were surveyed during data collection had college degrees.

In Nepal, the dependency on foreign farmers seems to be “spinning out of control” calling for young Nepalis to step in. The growing reliance on food items is not only widening Nepal’s trade deficit, it also records opportunity costs of up to over $2 billion every year.

According to the department of customs, dependency on foreign agro imports has increased by 16.96 percent in the first half of this fiscal year, reaching over $1 billion. Therefore, scoring high points or getting back to agriculture must be young Nepal’s main goal. Then the growth in our agricultural sector, which is indisputably the primary leg of overall economic growth in Nepal, will sustain all that we ought to be proud of. 

To make agriculture the most exciting sector to engage in for young Nepalis, two issues must be managed to create opportunities in the sector.

Remittance and agriculture development

Labour out-migration can retain its economic value only if the earnings are invested in a way that generates greater returns. Here’s why the billion-dollar remittance gain should be piped into the agriculture sector. There are plenty of ways to invest in the agricultural sector which will guarantee job creation.

In 2016, Nepal ranked number one in the world for remittances received—an estimated $6.6 billion. This was equivalent to 31.3 percent of the total Gross Domestic Product (GDP).

Most of this money went back into the remittance circle as repayments and further loans, or it was used in the construction of new houses. This trend is most likely to continue if entrepreneurship does not stir innovative business arrangements.

In buying natural resources and commodities for example, Nepal has already started trending a culture to substitute chemical fertilisers with traditionally used Jhol Mol (combination of Jeevatu, urine, water, and cow dung).

Because chemical use cannot be a long-term solution in agriculture, there is an opening to invest in natural resource commodities. And there is plenty of possible export markets for this too. India alone uses over 50 million tons of fertiliser per annum.

Similarly, starting a hedge fund to invest in farmlands and farm produce could be equally beneficial. Goat farming for example could be a good way to start with a hedge fund or a partnership. Nepal imported over 200,000 goats between July 2017 and January 2018.

When remittance investment averaging $5 billion per year is fed into the sector through businesses, it will also reduce the import of food items, which currently stands at over $2 billion per year. These savings could then be used for innovation or social welfare. Remittance investment in agriculture can also help us ward off dependency on an already declining foreign employment market.

Moreover, last year’s diplomatic imbroglio followed by Saudi and Oman cutting off foreign workers to protect their own is only the beginning of a dip in foreign employment opportunities for young Nepalis. The closing of the 2022 World Cup in Qatar will cut off even more Nepali workers.

Remittance money or foreign employment is not a long-term solution, and there must be proper use of the capital generated.

A case to invest

There’s another durable reason why making a business case out of agriculture is a smart move. Despite continued administrative uncertainties in Nepal, the government has been very consistent in supporting agriculture development in Nepal. And the international community recognises its importance too.

Since 1990, four major agricultural policies intended to support the commercial competitiveness of Nepal’s agro sector has been put in place: i) Agriculture Perspective Plan (APP), ii) Agribusiness Promotion Policy (AgPP), iii) Agriculture Development Strategy (ADS) and iv) Agriculture Mechanisation Promotion Policy (AMPP).

The Ministry of Agriculture Development has also handed in a new Right to Food Bill to the Cabinet for its endorsement that will protect investments in agriculture. The provisions include imprisonment of up to 10 years and a fine of up to Rs500,000 for i) creating a famine like situation ii) creating obstruction in the supply of essential foods and iii) distributing food to those who qualify for special protection.

The United Nations World Food Program (WFP) and the International Centre for Integrated Mountain Development (ICIMOD) have recently launched a new online Food Security Information System to map and visualise patterns of food security, poverty and malnutrition in Nepal which will be very useful for all kinds of agri-business analysis.

Just last month the government and the World Bank signed three financing agreements for $400 million to invest in various projects including a financing agreement to provide $80 million under the livestock sector innovation project. It is estimated that approximately 200,000 livestock producers will benefit from the project.

The United States Agency for International Development too recently launched “Kisan II” with the aim of facilitating the value chain of farm products of Nepal’s rural areas with investments up to $32.7 million.

These efforts make agriculture business a secured playground for young Nepalis to consider getting into. However, the implementation of the policies and projects must be managed to reduce costs for both producers and consumers.  

Here are some ways of being a part of these efforts: 

i) operate subsidised rental markets designed to mechanise the agricultural sector and reduce production costs,

ii) tap into the budding urban roof top farming culture and promote communal management of produces, this will help houses cut down on demand costs while the community reaps benefit of extra harvests at minimal costs in communal markets,

iii) get involved in an international development projects in agriculture,

iv) reap benefits of incentives like tax cuts on agricultural exports,

v) be a part of the annual Agritech International Expo (Feb 15-18, 2018), Nepal International Trade Fair (March 8-12, 2018), etc. to understand the potentials of the business in agriculture. 

Assured efforts from the government and non-governmental organisations needs to align with an awakening of the youth’s interest to make business out of agriculture, which is aimed towards grooming the two-way-cost reduction model in Nepal. This ought to provide advantages that are conceivably as competitive as any other line of work.

The key is to unlock the business potential in agriculture for the youth. And to make agriculture attractive for the 450,000 to 500,000 young people entering the job force annually.

Remittance, averaging $5 billion every year, which the youth are bringing into the country, should be invested in agriculture businesses to retain the income value through higher returns and proper business models.

And remember, farming a business case is not only a great way to make profits, there’s a higher calling in it.

Basnyat holds a master’s degree in Diplomacy and International Studies and can be contacted for agriculture hedge funds in Nepal    

Published: 27-02-2018 08:46

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